rules.house.gov · h.l.c. amendment in the nature of a substitute to h.r. 2830, as reported offered...

H.L.C.

AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO H.R. 2830, AS REPORTED

OFFERED BY M�. ��

Strike all after the enacting clause and insert the

following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.1

(a) SHORT TITLE.—This Act may be cited as the2

‘‘Pension Protection Act of 2005’’.3

(b) TABLE OF CONTENTS.—The table of contents for4

this Act is as follows:5

Sec. 1. Short title and table of contents.

TITLE I—REFORM OF FUNDING RULES FOR SINGLE-EMPLOYER

DEFINED BENEFIT PENSION PLANS

Subtitle A—Amendments to Employee Retirement Income Security Act of

1974

Sec. 101. Minimum funding standards.

Sec. 102. Funding rules for single-employer defined benefit pension plans.

Sec. 103. Benefit limitations under single-employer plans.

Sec. 104. Technical and conforming amendments.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 111. Minimum funding standards.

Sec. 112. Funding rules for single-employer defined benefit pension plans.

Sec. 113. Benefit limitations under single-employer plans.

Sec. 114. Technical and conforming amendments.

Subtitle C—Other Provisions

Sec. 121. Modification of transition rule to pension funding requirements.

Sec. 122. Treatment of nonqualified deferred compensation plans when em-

ployer defined benefit plan in at-risk status.

TITLE II—FUNDING RULES FOR MULTIEMPLOYER DEFINED

BENEFIT PLANS

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Subtitle A—Amendments to Employee Retirement Income Security Act of

1974

Sec. 201. Funding rules for multiemployer defined benefit plans.

Sec. 202. Additional funding rules for multiemployer plans in endangered or

critical status.

Sec. 203. Measures to forestall insolvency of multiemployer plans.

Sec. 204. Withdrawal liability reforms.

Sec. 205. Removal of restrictions with respect to procedures applicable to dis-

putes involving withdrawal liability.

Subtitle B—Amendments to Internal Revenue Code of 1986

Sec. 211. Funding rules for multiemployer defined benefit plans.

Sec. 212. Additional funding rules for multiemployer plans in endangered or

critical status.

Sec. 213. Measures to forestall insolvency of multiemployer plans.

TITLE III—OTHER PROVISIONS

Sec. 301. Interest rate for 2006 funding requirements.

Sec. 302. Interest rate assumption for determination of lump sum distributions.

Sec. 303. Interest rate assumption for applying benefit limitations to lump sum

distributions.

Sec. 304. Distributions during working retirement.

Sec. 305. Other amendments relating to prohibited transactions.

Sec. 306. Correction period for certain transactions involving securities and

commodities.

Sec. 307. Recovery by reimbursement or subrogation with respect to provided

benefits.

Sec. 308. Exercise of control over plan assets in connection with qualified

changes in investment options.

Sec. 309. Clarification of fiduciary rules.

Sec. 310. Government Accountability Office pension funding report.

TITLE IV—IMPROVEMENTS IN PBGC GUARANTEE PROVISIONS

Sec. 401. Increases in PBGC premiums.

TITLE V—DISCLOSURE

Sec. 501. Defined benefit plan funding notices.

Sec. 502. Additional disclosure requirements.

Sec. 503. Section 4010 filings with the PBGC.

TITLE VI—INVESTMENT ADVICE

Sec. 601. Amendments to Employee Retirement Income Security Act of 1974

providing prohibited transaction exemption for provision of in-

vestment advice.

Sec. 602. Amendments to Internal Revenue Code of 1986 providing prohibited

transaction exemption for provision of investment advice.

TITLE VII—BENEFIT ACCRUAL STANDARDS

Sec. 701. Benefit accrual standards.

TITLE VIII—DEDUCTION LIMITATIONS

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Sec. 801. Increase in deduction limits.

Sec. 802. Updating deduction rules for combination of plans.

TITLE IX—ENHANCED RETIREMENTS SAVINGS AND DEFINED

CONTRIBUTION PLANS

Sec. 901. Pensions and individual retirement arrangement provisions of Eco-

nomic Growth and Tax Relief Reconciliation Act of 2001 made

permanent.

Sec. 902. Saver’s credit.

Sec. 903. Increasing participation through automatic contribution arrange-

ments.

Sec. 904. Penalty-free withdrawals from retirement plans for individuals called

to active duty for at least 179 days.

Sec. 905. Waiver of 10 percent early withdrawal penalty tax on certain dis-

tributions of pension plans for public safety employees.

Sec. 906. Combat zone compensation taken into account for purposes of deter-

mining limitation and deductibility of contributions to indi-

vidual retirement plans.

Sec. 907. Direct payment of tax refunds to individual retirement plans.

Sec. 908. IRA eligibility for the disabled.

Sec. 909. Allow rollovers by nonspouse beneficiaries of certain retirement plan

distributions.

TITLE X—PROVISIONS TO ENHANCE HEALTH CARE

AFFORDABILITY

Sec. 1001. Treatment of annuity and life insurance contracts with a long-term

care insurance feature.

Sec. 1002. Disposition of unused health and dependent care benefits in cafe-

teria plans and flexible spending arrangements.

Sec. 1003. Distributions from governmental retirement plans for health and

long-term care insurance for public safety officers.

TITLE XI—GENERAL PROVISIONS

Sec. 1101. Provisions relating to plan amendments.

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TITLE I—REFORM OF FUNDING1

RULES FOR SINGLE-EM-2

PLOYER DEFINED BENEFIT3

PENSION PLANS4

Subtitle A—Amendments to Em-5

ployee Retirement Income Secu-6

rity Act of 19747

SEC. 101. MINIMUM FUNDING STANDARDS.8

(a) REPEAL OF EXISTING FUNDING RULES.—Sec-9

tions 302 through 308 of the Employee Retirement In-10

come Security Act of 1974 (29 U.S.C. 1082 through11

1086) are repealed.12

(b) NEW MINIMUM FUNDING STANDARDS.—Part 313

of subtitle B of title I of such Act (as amended by sub-14

section (a)) is amended further by inserting after section15

301 the following new section:16

‘‘MINIMUM FUNDING STANDARDS17

‘‘SEC. 302. (a) REQUIREMENT TO MEET MINIMUM18

FUNDING STANDARD.—19

‘‘(1) IN GENERAL.—A plan to which this part20

applies shall satisfy the minimum funding standard21

applicable to the plan for any plan year.22

‘‘(2) MINIMUM FUNDING STANDARD.—For pur-23

poses of paragraph (1), a plan shall be treated as24

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satisfying the minimum funding standard for a plan1

year if—2

‘‘(A) in the case of a defined benefit plan3

which is a single-employer plan, the employer4

makes contributions to or under the plan for5

the plan year which, in the aggregate, are not6

less than the minimum required contribution7

determined under section 303 for the plan for8

the plan year,9

‘‘(B) in the case of a money purchase plan10

which is a single-employer plan, the employer11


the plan year which are required under the13

terms of the plan, and14

‘‘(C) in the case of a multiemployer plan,15

the employers make contributions to or under16

the plan for any plan year which, in the aggre-17

gate, are sufficient to ensure that the plan does18

not have an accumulated funding deficiency19

under section 304 as of the end of the plan20

year.21

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—22

‘‘(1) IN GENERAL.—Except as provided in para-23

graph (2), the amount of any contribution required24

by this section (including any required installments25

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under paragraphs (3) and (4) of section 303(j))1

shall be paid by the employer responsible for making2

contributions to or under the plan.3

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE4

EMPLOYER MEMBER OF CONTROLLED GROUP.—In5

the case of a single-employer plan, if the employer6

referred to in paragraph (1) is a member of a con-7

trolled group, each member of such group shall be8

jointly and severally liable for payment of such con-9

tributions.10

‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND-11

ARDS.—12

‘‘(1) WAIVER IN CASE OF BUSINESS HARD-13

SHIP.—14

‘‘(A) IN GENERAL.—If—15

‘‘(i) an employer is (or in the case of16

a multiemployer plan, 10 percent or more17

of the number of employers contributing to18

or under the plan is) unable to satisfy the19

minimum funding standard for a plan year20

without temporary substantial business21

hardship (substantial business hardship in22

the case of a multiemployer plan), and23

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‘‘(ii) application of the standard would1

be adverse to the interests of plan partici-2

pants in the aggregate,3

the Secretary of the Treasury may, subject to4

subparagraph (C), waive the requirements of5

subsection (a) for such year with respect to all6

or any portion of the minimum funding stand-7

ard. The Secretary of the Treasury shall not8

waive the minimum funding standard with re-9

spect to a plan for more than 3 of any 15 (510

of any 15 in the case of a multiemployer plan)11

consecutive plan years.12

‘‘(B) EFFECTS OF WAIVER.—If a waiver is13

granted under subparagraph (A) for any plan14

year—15

‘‘(i) in the case of a single-employer16

plan, the minimum required contribution17

under section 303 for the plan year shall18

be reduced by the amount of the waived19

funding deficiency and such amount shall20

be amortized as required under section21

303(e), and22

‘‘(ii) in the case of a multiemployer23

plan, the funding standard account shall24

be credited under section 304(b)(3)(C)25

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with the amount of the waived funding de-1

ficiency and such amount shall be amor-2

tized as required under section3

304(b)(2)(C).4

‘‘(C) WAIVER OF AMORTIZED PORTION5

NOT ALLOWED.—The Secretary of the Treasury6

may not waive under subparagraph (A) any7

portion of the minimum funding standard8

under subsection (a) for a plan year which is9

attributable to any waived funding deficiency10

for any preceding plan year.11

‘‘(2) DETERMINATION OF BUSINESS HARD-12

SHIP.—For purposes of this subsection, the factors13

taken into account in determining temporary sub-14

stantial business hardship (substantial business15

hardship in the case of a multiemployer plan) shall16

include (but shall not be limited to) whether or17

not—18

‘‘(A) the employer is operating at an eco-19

nomic loss,20

‘‘(B) there is substantial unemployment or21

underemployment in the trade or business and22

in the industry concerned,23

‘‘(C) the sales and profits of the industry24

concerned are depressed or declining, and25

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‘‘(D) it is reasonable to expect that the1

plan will be continued only if the waiver is2

granted.3

‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur-4

poses of this part, the term ‘waived funding defi-5

ciency’ means the portion of the minimum funding6

standard under subsection (a) (determined without7

regard to the waiver) for a plan year waived by the8

Secretary of the Treasury and not satisfied by em-9

ployer contributions.10

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM-11

PLOYER PLANS, CONSULTATIONS.—12

‘‘(A) SECURITY MAY BE REQUIRED.—13

‘‘(i) IN GENERAL.—Except as pro-14

vided in subparagraph (C), the Secretary15

of the Treasury may require an employer16

maintaining a defined benefit plan which is17

a single-employer plan (within the meaning18

of section 4001(a)(15)) to provide security19

to such plan as a condition for granting or20

modifying a waiver under paragraph (1).21

‘‘(ii) SPECIAL RULES.—Any security22

provided under clause (i) may be perfected23

and enforced only by the Pension Benefit24

Guaranty Corporation, or at the direction25

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of the Corporation, by a contributing spon-1

sor (within the meaning of section2

4001(a)(13)), or a member of such spon-3

sor’s controlled group (within the meaning4

of section 4001(a)(14)).5

‘‘(B) CONSULTATION WITH THE PENSION6

BENEFIT GUARANTY CORPORATION.—Except as7

provided in subparagraph (C), the Secretary of8

the Treasury shall, before granting or modi-9

fying a waiver under this subsection with re-10

spect to a plan described in subparagraph11

(A)(i)—12

‘‘(i) provide the Pension Benefit13

Guaranty Corporation with—14

‘‘(I) notice of the completed ap-15

plication for any waiver or modifica-16

tion, and17

‘‘(II) an opportunity to comment18

on such application within 30 days19

after receipt of such notice, and20

‘‘(ii) consider—21

‘‘(I) any comments of the Cor-22

poration under clause (i)(II), and23

‘‘(II) any views of any employee24

organization (within the meaning of25

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section 3(4)) representing participants1

in the plan which are submitted in2

writing to the Secretary of the Treas-3

ury in connection with such applica-4

tion.5

Information provided to the Corporation under6

this subparagraph shall be considered tax re-7

turn information and subject to the safe-8

guarding and reporting requirements of section9

6103(p) of the Internal Revenue Code of 1986.10

‘‘(C) EXCEPTION FOR CERTAIN WAIV-11

ERS.—12

‘‘(i) IN GENERAL.—The preceding13

provisions of this paragraph shall not14

apply to any plan with respect to which the15

sum of—16

‘‘(I) the aggregate unpaid min-17

imum required contribution for the18

plan year and all preceding plan19

years, and20

‘‘(II) the present value of all21

waiver amortization installments de-22

termined for the plan year and suc-23

ceeding plan years under section24

303(e)(2),25

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is less than $1,000,000.1

‘‘(ii) TREATMENT OF WAIVERS FOR2

WHICH APPLICATIONS ARE PENDING.—The3

amount described in clause (i)(I) shall in-4

clude any increase in such amount which5

would result if all applications for waivers6

of the minimum funding standard under7

this subsection which are pending with re-8

spect to such plan were denied.9

‘‘(iii) UNPAID MINIMUM REQUIRED10

CONTRIBUTION.—For purposes of this11

subparagraph—12

‘‘(I) IN GENERAL.—The term13

‘unpaid minimum required contribu-14

tion’ means, with respect to any plan15

year, any minimum required contribu-16

tion under section 303 for the plan17

year which is not paid on or before18

the due date (as determined under19

section 303(j)(1)) for the plan year.20

‘‘(II) ORDERING RULE.—For21

purposes of subclause (I), any pay-22

ment to or under a plan for any plan23

year shall be allocated first to unpaid24

minimum required contributions for25

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all preceding plan years on a first-in,1

first-out basis and then to the min-2

imum required contribution under sec-3

tion 303 for the plan year.4

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER5

PLANS.—6

‘‘(A) APPLICATION MUST BE SUBMITTED7

BEFORE DATE 21⁄2 MONTHS AFTER CLOSE OF8

YEAR.—In the case of a single-employer plan,9

no waiver may be granted under this subsection10

with respect to any plan for any plan year un-11

less an application therefor is submitted to the12

Secretary of the Treasury not later than the13

15th day of the 3rd month beginning after the14

close of such plan year.15

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM-16

BER OF CONTROLLED GROUP.—In the case of a17

single-employer plan, if an employer is a mem-18

ber of a controlled group, the temporary sub-19

stantial business hardship requirements of20

paragraph (1) shall be treated as met only if21

such requirements are met—22

‘‘(i) with respect to such employer,23

and24

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‘‘(ii) with respect to the controlled1

group of which such employer is a member2

(determined by treating all members of3

such group as a single employer).4

The Secretary of the Treasury may provide that5

an analysis of a trade or business or industry6

of a member need not be conducted if such Sec-7

retary determines such analysis is not necessary8

because the taking into account of such member9

would not significantly affect the determination10

under this paragraph.11

‘‘(6) ADVANCE NOTICE.—12

‘‘(A) IN GENERAL.—The Secretary of the13

Treasury shall, before granting a waiver under14

this subsection, require each applicant to pro-15

vide evidence satisfactory to such Secretary that16

the applicant has provided notice of the filing of17

the application for such waiver to to each af-18

fected party (as defined in section19

4001(a)(21)). Such notice shall include a de-20

scription of the extent to which the plan is21

funded for benefits which are guaranteed under22

title IV and for benefit liabilities.23

‘‘(B) CONSIDERATION OF RELEVANT IN-24

FORMATION.—The Secretary of the Treasury25

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shall consider any relevant information provided1

by a person to whom notice was given under2

subparagraph (A).3

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—4

‘‘(A) IN GENERAL.—No amendment of a5

plan which increases the liabilities of the plan6

by reason of any increase in benefits, any7

change in the accrual of benefits, or any change8

in the rate at which benefits become nonforfeit-9

able under the plan shall be adopted if a waiver10

under this subsection or an extension of time11

under section 304(d) is in effect with respect to12

the plan, or if a plan amendment described in13

subsection (d)(2) has been made at any time in14

the preceding 12 months (24 months in the15

case of a multiemployer plan). If a plan is16

amended in violation of the preceding sentence,17

any such waiver, or extension of time, shall not18

apply to any plan year ending on or after the19

date on which such amendment is adopted.20

‘‘(B) EXCEPTION.—Paragraph (1) shall21

not apply to any plan amendment which—22

‘‘(i) the Secretary of the Treasury de-23

termines to be reasonable and which pro-24

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vides for only de minimis increases in the1

liabilities of the plan,2

‘‘(ii) only repeals an amendment de-3

scribed in subsection (d)(2), or4

‘‘(iii) is required as a condition of5

qualification under part I of subchapter D6

of chapter 1 of the Internal Revenue Code7

of 1986.8

‘‘(8) CROSS REFERENCE.—For corresponding9

duties of the Secretary of the Treasury with regard10

to implementation of the Internal Revenue Code of11

1986, see section 412(c) of such Code.12

‘‘(d) MISCELLANEOUS RULES.—13

‘‘(1) CHANGE IN METHOD OR YEAR.—If the14

funding method, the valuation date, or a plan year15

for a plan is changed, the change shall take effect16

only if approved by the Secretary of the Treasury.17

‘‘(2) CERTAIN RETROACTIVE PLAN AMEND-18

MENTS.—For purposes of this section, any amend-19

ment applying to a plan year which—20

‘‘(A) is adopted after the close of such plan21

year but no later than 21⁄2 months after the22

close of the plan year (or, in the case of a mul-23

tiemployer plan, no later than 2 years after the24

close of such plan year),25

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‘‘(B) does not reduce the accrued benefit1

of any participant determined as of the begin-2

ning of the first plan year to which the amend-3

ment applies, and4

‘‘(C) does not reduce the accrued benefit of5

any participant determined as of the time of6

adoption except to the extent required by the7

circumstances,8

shall, at the election of the plan administrator, be9

deemed to have been made on the first day of such10

plan year. No amendment described in this para-11

graph which reduces the accrued benefits of any par-12

ticipant shall take effect unless the plan adminis-13

trator files a notice with the Secretary of the Treas-14

ury notifying him of such amendment and such Sec-15

retary has approved such amendment, or within 9016

days after the date on which such notice was filed,17

failed to disapprove such amendment. No amend-18

ment described in this subsection shall be approved19

by the Secretary of the Treasury unless such Sec-20

retary determines that such amendment is necessary21

because of a substantial business hardship (as deter-22

mined under subsection (c)(2)) and that a waiver23

under subsection (c) (or, in the case of a multiem-24

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ployer plan, any extension of the amortization period1

under section 304(d)) is unavailable or inadequate.2

‘‘(3) CONTROLLED GROUP.—For purposes of3

this section, the term ‘controlled group’ means any4

group treated as a single employer under subsection5

(b), (c), (m), or (o) of section 414 of the Internal6

Revenue Code of 1986.’’.7

(c) CLERICAL AMENDMENT.—The table of contents8

in section 1 of such Act is amended by striking the items9

relating to sections 302 through 308 and inserting the fol-10

lowing new item:11

‘‘Sec. 302. Minimum funding standards.’’.

(d) EFFECTIVE DATE.—The amendments made by12

this section shall apply to plan years beginning after 2006.13

SEC. 102. FUNDING RULES FOR SINGLE-EMPLOYER DE-14

FINED BENEFIT PENSION PLANS.15

(a) IN GENERAL.—Part 3 of subtitle B of title I of16

the Employee Retirement Income Security Act of 1974 (as17

amended by section 101 of this Act) is amended further18

by inserting after section 302 the following new section:19

‘‘MINIMUM FUNDING STANDARDS FOR SINGLE-EMPLOYER20

DEFINED BENEFIT PENSION PLANS21

‘‘SEC. 303. (a) MINIMUM REQUIRED CONTRIBU-22

TION.—For purposes of this section and section23

302(a)(2)(A), except as provided in subsection (f), the24

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term ‘minimum required contribution’ means, with respect1

to any plan year of a single-employer plan—2

‘‘(1) in any case in which the value of plan as-3

sets of the plan (as reduced under subsection4

(f)(4)(B)) is less than the funding target of the plan5

for the plan year, the sum of—6

‘‘(A) the target normal cost of the plan for7

the plan year,8

‘‘(B) the shortfall amortization charge (if9

any) for the plan for the plan year determined10

under subsection (c), and11

‘‘(C) the waiver amortization charge (if12

any) for the plan for the plan year as deter-13

mined under subsection (e);14



(f)(4)(B)) exceeds the funding target of the plan for17

the plan year, the target normal cost of the plan for18

the plan year reduced by such excess; or19

‘‘(3) in any other case, the target normal cost20

of the plan for the plan year.21

‘‘(b) TARGET NORMAL COST.—For purposes of this22

section, except as provided in subsection (i)(2) with re-23

spect to plans in at-risk status, the term ‘target normal24

cost’ means, for any plan year, the present value of all25

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benefits which are expected to accrue or to be earned1

under the plan during the plan year. For purposes of this2

subsection, if any benefit attributable to services per-3

formed in a preceding plan year is increased by reason4

of any increase in compensation during the current plan5

year, the increase in such benefit shall be treated as hav-6

ing accrued during the current plan year.7

‘‘(c) SHORTFALL AMORTIZATION CHARGE.—8

‘‘(1) IN GENERAL.—For purposes of this sec-9

tion, the shortfall amortization charge for a plan for10

any plan year is the aggregate total of the shortfall11

amortization installments for such plan year with re-12

spect to the shortfall amortization bases for such13

plan year and each of the 6 preceding plan years.14

‘‘(2) SHORTFALL AMORTIZATION INSTALL-15

MENT.—The plan sponsor shall determine, with re-16

spect to the shortfall amortization base of the plan17

for any plan year, the amounts necessary to amor-18

tize such shortfall amortization base, in level annual19

installments over a period of 7 plan years beginning20

with such plan year. For purposes of paragraph (1),21

the annual installment of such amortization for each22

plan year in such 7-plan-year period is the shortfall23

amortization installment for such plan year with re-24

spect to such shortfall amortization base. In deter-25

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mining any shortfall amortization installment under1

this paragraph, the plan sponsor shall use the seg-2

ment rates determined under subparagraph (C) of3

subsection (h)(2), applied under rules similar to the4

rules of subparagraph (B) of subsection (h)(2).5

‘‘(3) SHORTFALL AMORTIZATION BASE.—For6

purposes of this section, the shortfall amortization7

base of a plan for a plan year is the excess (if any)8

of—9

‘‘(A) the funding shortfall of such plan for10

such plan year, over11

‘‘(B) the sum of—12

‘‘(i) the present value (determined13

using the segment rates determined under14

subparagraph (C) of subsection (h)(2), ap-15

plied under rules similar to the rules of16

subparagraph (B) of subsection (h)(2)) of17

the aggregate total of the shortfall amorti-18

zation installments, for such plan year and19

the 5 succeeding plan years, which have20

been determined with respect to the short-21

fall amortization bases of the plan for each22

of the 6 plan years preceding such plan23

year, and24

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22

H.L.C.

‘‘(ii) the present value (as so deter-1

mined) of the aggregate total of the waiver2

amortization installments for such plan3

year and the 5 succeeding plan years,4

which have been determined with respect5

to the waiver amortization bases of the6

plan for each of the 5 plan years preceding7

such plan year.8

‘‘(4) FUNDING SHORTFALL.—For purposes of9

this section, the funding shortfall of a plan for any10

plan year is the excess (if any) of—11

‘‘(A) the funding target of the plan for the12

plan year, over13

‘‘(B) the value of plan assets of the plan14

(as reduced under subsection (f)(4)(B)) for the15

plan year which are held by the plan on the16

valuation date.17

‘‘(5) EXEMPTION FROM NEW SHORTFALL AM-18

ORTIZATION BASE.—19

‘‘(A) IN GENERAL.—In any case in which20

the value of plan assets of the plan (as reduced21

under subsection (f)(4)(A)) is equal to or great-22

er than the funding target of the plan for the23

plan year, the shortfall amortization base of the24

plan for such plan year shall be zero.25

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23

H.L.C.

‘‘(B) TRANSITION RULE.—1

‘‘(i) IN GENERAL.—In the case of a2

non-deficit reduction plan, subparagraph3

(A) shall be applied to plan years begin-4

ning after 2006 and before 2011 by sub-5

stituting, for the funding target of the plan6

for the plan year, the applicable percentage7

of such funding target determined under8

the following table:9

‘‘In the case of a plan year beginning in calendaryear:

The appli-cable per-centage is:

2007 .............................................................................................. 92 percent2008 .............................................................................................. 94 percent2009 .............................................................................................. 96 percent2010 .............................................................................................. 98 percent.

‘‘(ii) LIMITATION.—Clause (i) shall10

not apply with respect to any plan year11

after 2007 unless the ratio (expressed as a12

percentage) which—13

‘‘(I) the value of plan assets for14

each preceding plan year after 200615

(as reduced under subsection16

(f)(4)(A)), bears to17

‘‘(II) the funding target of the18

plan for such preceding plan year (de-19

termined without regard to subsection20

(i)(1)),21

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24

H.L.C.

is not less than the applicable percentage1

with respect to such preceding plan deter-2

mined under clause (i).3

‘‘(iii) NON-DEFICIT REDUCTION4

PLAN.—For purposes of clause (i), the5

term ‘non-deficit reduction plan’ means6

any plan—7

‘‘(I) to which this part (as in ef-8

fect on the day before the date of the9

enactment of the Pension Protection10

Act of 2005) applied for the plan year11

beginning in 2006, and12

‘‘(II) to which section 302(d) (as13

so in effect) did not apply for such14

plan year.15

‘‘(6) EARLY DEEMED AMORTIZATION UPON AT-16

TAINMENT OF FUNDING TARGET.—In any case in17

which the funding shortfall of a plan for a plan year18

is zero, for purposes of determining the shortfall am-19

ortization charge for such plan year and succeeding20

plan years, the shortfall amortization bases for all21

preceding plan years (and all shortfall amortization22

installments determined with respect to such bases)23

shall be reduced to zero.24

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H.L.C.

‘‘(d) RULES RELATING TO FUNDING TARGET.—For1

purposes of this section—2

‘‘(1) FUNDING TARGET.—Except as provided in3

subsection (i)(1) with respect to plans in at-risk sta-4

tus, the funding target of a plan for a plan year is5

the present value of all liabilities to participants and6

their beneficiaries under the plan for the plan year.7

‘‘(2) FUNDING TARGET ATTAINMENT PERCENT-8

AGE.—The ‘funding target attainment percentage’ of9

a plan for a plan year is the ratio (expressed as a10


‘‘(A) the value of plan assets for the plan12

year (as reduced under subsection (f)(4)(B)),13

bears to14

‘‘(B) the funding target of the plan for the15

plan year (determined without regard to sub-16

section (i)(1)).17

‘‘(e) WAIVER AMORTIZATION CHARGE.—18

‘‘(1) DETERMINATION OF WAIVER AMORTIZA-19

TION CHARGE.—The waiver amortization charge (if20

any) for a plan for any plan year is the aggregate21

total of the waiver amortization installments for22

such plan year with respect to the waiver amortiza-23

tion bases for each of the 5 preceding plan years.24

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26

H.L.C.

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—1

The plan sponsor shall determine, with respect to2

the waiver amortization base of the plan for any3

plan year, the amounts necessary to amortize such4

waiver amortization base, in level annual install-5

ments over a period of 5 plan years beginning with6

the succeeding plan year. For purposes of paragraph7

(1), the annual installment of such amortization for8

each plan year in such 5-plan year period is the9

waiver amortization installment for such plan year10

with respect to such waiver amortization base.11

‘‘(3) INTEREST RATE.—In determining any12

waiver amortization installment under this sub-13

section, the plan sponsor shall use the segment rates14

determined under subparagraph (C) of subsection15

(h)(2), applied under rules similar to the rules of16

subparagraph (B) of subsection (h)(2).17

‘‘(4) WAIVER AMORTIZATION BASE.—The waiv-18

er amortization base of a plan for a plan year is the19

amount of the waived funding deficiency (if any) for20

such plan year under section 302(c).21




is zero, for purposes of determining the waiver am-25

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27

H.L.C.


plan years, the waiver amortization base for all pre-2

ceding plan years shall be reduced to zero.3

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU-4

TION BY PRE-FUNDING BALANCE AND FUNDING STAND-5

ARD CARRYOVER BALANCE.—6

‘‘(1) ELECTION TO MAINTAIN BALANCES.—7

‘‘(A) PRE-FUNDING BALANCE.—The plan8

sponsor of a single-employer plan may elect to9

maintain a pre-funding balance.10

‘‘(B) FUNDING STANDARD CARRYOVER11

BALANCE.—12


single-employer plan described in clause14

(ii), the plan sponsor may elect to maintain15

a funding standard carryover balance, until16

such balance is reduced to zero.17

‘‘(ii) PLANS MAINTAINING FUNDING18

STANDARD ACCOUNT IN 2006.—A plan is19

described in this clause if the plan—20

‘‘(I) was in effect for a plan year21


‘‘(II) had a positive balance in23

the funding standard account under24

section 302(b) as in effect for such25

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28

H.L.C.

plan year and determined as of the1

end of such plan year.2

‘‘(2) APPLICATION OF BALANCES.—A pre-fund-3

ing balance and a funding standard carryover bal-4

ance maintained pursuant to this paragraph—5

‘‘(A) shall be available for crediting against6

the minimum required contribution, pursuant to7

an election under paragraph (3),8

‘‘(B) shall be applied as a reduction in the9

amount treated as the value of plan assets for10

purposes of this section, to the extent provided11

in paragraph (4), and12

‘‘(C) may be reduced at any time, pursu-13

ant to an election under paragraph (5).14

‘‘(3) ELECTION TO APPLY BALANCES AGAINST15

MINIMUM REQUIRED CONTRIBUTION.—16

‘‘(A) IN GENERAL.—Except as provided in17

subparagraphs (B) and (C), in the case of any18

plan year in which the plan sponsor elects to19

credit against the minimum required contribu-20

tion for the current plan year all or a portion21

of the pre-funding balance or the funding22

standard carryover balance for the current plan23

year (not in excess of such minimum required24

contribution), the minimum required contribu-25

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29

H.L.C.

tion for the plan year shall be reduced by the1

amount so credited by the plan sponsor. For2

purposes of the preceding sentence, the min-3

imum required contribution shall be determined4

after taking into account any waiver under sec-5

tion 302(c).6

‘‘(B) COORDINATION WITH FUNDING7

STANDARD CARRYOVER BALANCE.—To the ex-8

tent that any plan has a funding standard car-9

ryover balance greater than zero, no amount of10

the pre-funding balance of such plan may be11

credited under this paragraph in reducing the12

minimum required contribution.13

‘‘(C) LIMITATION FOR UNDERFUNDED14

PLANS.—The preceding provisions of this para-15

graph shall not apply for any plan year if the16

ratio (expressed as a percentage) which—17

‘‘(i) the value of plan assets for the18

preceding plan year (as reduced under19

paragraph (4)(C)), bears to20

‘‘(ii) the funding target of the plan for21

the preceding plan year (determined with-22

out regard to subsection (i)(1)),23

is less than 80 percent.24

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30

H.L.C.

‘‘(4) EFFECT OF BALANCES ON AMOUNTS1

TREATED AS VALUE OF PLAN ASSETS.—In the case2

of any plan maintaining a pre-funding balance or a3

funding standard carryover balance pursuant to this4

subsection, the amount treated as the value of plan5

assets shall be deemed to be such amount, reduced6

as provided in the following subparagraphs:7

‘‘(A) APPLICABILITY OF SHORTFALL AM-8

ORTIZATION BASE.—For purposes of subsection9

(c)(5), the value of plan assets is deemed to be10

such amount, reduced by the amount of the11

pre-funding balance, but only if an election12

under paragraph (2) applying any portion of13

the pre-funding balance in reducing the min-14

imum required contribution is in effect for the15

plan year.16

‘‘(B) DETERMINATION OF EXCESS ASSETS,17

FUNDING SHORTFALL, AND FUNDING TARGET18

ATTAINMENT PERCENTAGE.—19

‘‘(i) IN GENERAL.—For purposes of20

subsections (a), (c)(4)(B), and (d)(2)(A),21

the value of plan assets is deemed to be22

such amount, reduced by the amount of23

the pre-funding balance and the funding24

standard carryover balance.25

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31

H.L.C.

‘‘(ii) SPECIAL RULE FOR CERTAIN1

BINDING AGREEMENTS WITH PBGC.—For2

purposes of subsection (c)(4)(B), the value3

of plan assets shall not be deemed to be re-4

duced for a plan year by the amount of the5

specified balance if, with respect to such6

balance, there is in effect for a plan year7

a binding written agreement with the Pen-8

sion Benefit Guaranty Corporation which9

provides that such balance is not available10

to reduce the minimum required contribu-11

tion for the plan year. For purposes of the12

preceding sentence, the term ‘specified bal-13

ance’ means the pre-funding balance or the14

funding standard carryover balance, as the15

case may be.16

‘‘(C) AVAILABILITY OF BALANCES IN PLAN17

YEAR FOR CREDITING AGAINST MINIMUM RE-18

QUIRED CONTRIBUTION.—For purposes of19

paragraph (3)(C)(i) of this subsection, the value20

of plan assets is deemed to be such amount, re-21

duced by the amount of the pre-funding bal-22

ance.23

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO24

DETERMINATIONS OF VALUE OF PLAN ASSETS AND25

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32

H.L.C.

CREDITING AGAINST MINIMUM REQUIRED CONTRIBU-1

TION.—2

‘‘(A) IN GENERAL.—The plan sponsor may3

elect to reduce by any amount the balance of4

the pre-funding balance and the funding stand-5

ard carryover balance for any plan year (but6

not below zero). Such reduction shall be effec-7

tive prior to any determination of the value of8

plan assets for such plan year under this sec-9

tion and application of the balance in reducing10

the minimum required contribution for such11

plan for such plan year pursuant to an election12

under paragraph (2).13

‘‘(B) COORDINATION BETWEEN PRE-FUND-14

ING BALANCE AND FUNDING STANDARD CARRY-15

OVER BALANCE.—To the extent that any plan16

has a funding standard carryover balance great-17

er than zero, no election may be made under18

subparagraph (A) with respect to the pre-fund-19

ing balance.20

‘‘(6) PRE-FUNDING BALANCE.—21

‘‘(A) IN GENERAL.—A pre-funding balance22

maintained by a plan shall consist of a begin-23

ning balance of zero, increased and decreased to24

the extent provided in subparagraphs (B) and25

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33

H.L.C.

(C), and adjusted further as provided in para-1

graph (8).2

‘‘(B) INCREASES.—As of the valuation3

date for each plan year beginning after 2007,4

the pre-funding balance of a plan shall be in-5

creased by the amount elected by the plan spon-6

sor for the plan year. Such amount shall not ex-7

ceed the excess (if any) of—8

‘‘(i) the aggregate total of employer9

contributions to the plan for the preceding10

plan year, over11

‘‘(ii) the minimum required contribu-12

tion for such preceding plan year (in-13

creased by interest on any portion of such14

minimum required contribution remaining15

unpaid as of the valuation date for the cur-16

rent plan year, at the effective interest rate17

for the plan for the preceding plan year,18

for the period beginning with the first day19

of such preceding plan year and ending on20

the date that payment of such portion is21

made).22

‘‘(C) DECREASES.—As of the valuation23

date for each plan year after 2007, the pre-24

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34

H.L.C.

funding balance of a plan shall be decreased1

(but not below zero) by the sum of—2

‘‘(i) the amount of such balance cred-3

ited under paragraph (2) (if any) in reduc-4

ing the minimum required contribution of5

the plan for the preceding plan year, and6

‘‘(ii) any reduction in such balance7

elected under paragraph (5).8

‘‘(7) FUNDING STANDARD CARRYOVER BAL-9

ANCE.—10

‘‘(A) IN GENERAL.—A funding standard11

carryover balance maintained by a plan shall12

consist of a beginning balance determined13

under subparagraph (B), decreased to the ex-14

tent provided in subparagraph (C), and ad-15

justed further as provided in paragraph (8).16

‘‘(B) BEGINNING BALANCE.—The begin-17

ning balance of the funding standard carryover18

balance shall be the positive balance described19

in paragraph (1)(B)(ii)(II).20


date for each plan year after 2007, the funding22

standard carryover balance of a plan shall be23

decreased (but not below zero) by the sum of—24

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35

H.L.C.







‘‘(8) ADJUSTMENTS TO BALANCES.—In deter-7

mining the pre-funding balance or the funding8

standard carryover balance of a plan as of the valu-9

ation date (before applying any increase or decrease10

under paragraph (6) or (7)), the plan sponsor shall,11

in accordance with regulations which shall be pre-12

scribed by the Secretary of the Treasury, adjust13

such balance so as to reflect the rate of net gain or14

loss (determined, notwithstanding subsection (g)(3),15

on the basis of fair market value) experienced by all16

plan assets for the period beginning with the valu-17

ation date for the preceding plan year and ending18

with the date preceding the valuation date for the19

current plan year, properly taking into account, in20

accordance with such regulations, all contributions,21

distributions, and other plan payments made during22

such period.23

‘‘(9) ELECTIONS.—Elections under this sub-24

section shall be made at such times, and in such25

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36

H.L.C.

form and manner, as shall be prescribed in regula-1

tions of the Secretary of the Treasury.2

‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL-3

ITIES.—4

‘‘(1) TIMING OF DETERMINATIONS.—Except as5

otherwise provided under this subsection, all deter-6

minations under this section for a plan year shall be7

made as of the valuation date of the plan for such8

plan year.9

‘‘(2) VALUATION DATE.—For purposes of this10

section—11


subparagraph (B), the valuation date of a plan13

for any plan year shall be the first day of the14

plan year.15

‘‘(B) EXCEPTION FOR SMALL PLANS.—If,16

on each day during the preceding plan year, a17

plan had 500 or fewer participants, the plan18

may designate any day during the plan year as19

its valuation date for such plan year and suc-20

ceeding plan years. For purposes of this sub-21

paragraph, all defined benefit plans which are22

single-employer plans and are maintained by23

the same employer (or any member of such em-24

ployer’s controlled group) shall be treated as 125

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37

H.L.C.

plan, but only participants with respect to such1

employer or member shall be taken into ac-2

count.3

‘‘(C) APPLICATION OF CERTAIN RULES IN4

DETERMINATION OF PLAN SIZE.—For purposes5

of this paragraph—6

‘‘(i) PLANS NOT IN EXISTENCE IN7

PRECEDING YEAR.—In the case of the first8

plan year of any plan, subparagraph (B)9

shall apply to such plan by taking into ac-10

count the number of participants that the11

plan is reasonably expected to have on12

days during such first plan year.13

‘‘(ii) PREDECESSORS.—Any reference14

in subparagraph (B) to an employer shall15

include a reference to any predecessor of16

such employer.17

‘‘(3) AUTHORIZATION OF USE OF ACTUARIAL18

VALUE.—For purposes of this section, the value of19

plan assets shall be determined on the basis of any20

reasonable actuarial method of valuation which takes21

into account fair market value and which is per-22

mitted under regulations prescribed by the Secretary23

of the Treasury, except that—24

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38

H.L.C.

‘‘(A) any such method providing for aver-1

aging of fair market values may not provide for2

averaging of such values over more than the 36-3

month period ending with the month which in-4

cludes the valuation date, and5

‘‘(B) any such method may not result in a6

determination of the value of plan assets which,7

at any time, is lower than 90 percent or greater8

than 110 percent of the fair market value of9

such assets at such time.10

‘‘(4) ACCOUNTING FOR CONTRIBUTION RE-11

CEIPTS.—For purposes of this section—12

‘‘(A) CONTRIBUTIONS FOR PRIOR PLAN13

YEARS TAKEN INTO ACCOUNT.—For purposes14

of determining the value of plan assets for any15

current plan year, in any case in which a con-16

tribution properly allocable to amounts owed for17

a preceding plan year is made on or after the18

valuation date of the plan for such current plan19

year, such contribution shall be taken into ac-20

count, except that any such contribution made21

during any such current plan year beginning22

after 2007 shall be taken into account only in23

an amount equal to its present value (deter-24

mined using the effective rate of interest for the25

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39

H.L.C.

plan for the preceding plan year) as of the valu-1

ation date of the plan for such current plan2

year.3

‘‘(B) CONTRIBUTIONS FOR CURRENT PLAN4

YEAR DISREGARDED.—For purposes of deter-5

mining the value of plan assets for any current6

plan year, contributions which are properly allo-7

cable to amounts owed for such plan year shall8

not be taken into account, and, in the case of9

any such contribution made before the valuation10

date of the plan for such plan year, such value11

of plan assets shall be reduced for interest on12

such amount determined using the effective rate13

of interest of the plan for the current plan year14

for the period beginning when such payment15

was made and ending on the valuation date of16

the plan.17

‘‘(5) ACCOUNTING FOR PLAN LIABILITIES.—18

For purposes of this section—19

‘‘(A) LIABILITIES TAKEN INTO ACCOUNT20

FOR CURRENT PLAN YEAR.—In determining the21

value of liabilities under a plan for a plan year,22

liabilities shall be taken into account to the ex-23

tent attributable to benefits (including any early24

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40

H.L.C.

retirement or similar benefit) accrued or earned1

as of the beginning of the plan year.2

‘‘(B) ACCRUALS DURING CURRENT PLAN3

YEAR DISREGARDED.—For purposes of sub-4

paragraph (A), benefits accrued or earned dur-5

ing such plan year shall not be taken into ac-6

count, irrespective of whether the valuation date7

of the plan for such plan year is later than the8

first day of such plan year.9

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—10

‘‘(1) IN GENERAL.—Subject to this subsection,11

the determination of any present value or other com-12

putation under this section shall be made on the13

basis of actuarial assumptions and methods—14

‘‘(A) each of which is reasonable (taking15

into account the experience of the plan and rea-16

sonable expectations), and17

‘‘(B) which, in combination, offer the actu-18

ary’s best estimate of anticipated experience19

under the plan.20

‘‘(2) INTEREST RATES.—21

‘‘(A) EFFECTIVE INTEREST RATE.—For22

purposes of this section, the term ‘effective in-23

terest rate’ means, with respect to any plan for24

any plan year, the single rate of interest which,25

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41

H.L.C.

if used to determine the present value of the1

plan’s liabilities referred to in subsection (d)(1),2

would result in an amount equal to the funding3

target of the plan for such plan year.4

‘‘(B) INTEREST RATES FOR DETERMINING5

FUNDING TARGET.—For purposes of deter-6

mining the funding target of a plan for any7

plan year, the interest rate used in determining8

the present value of the liabilities of the plan9

shall be—10

‘‘(i) in the case of liabilities reason-11

ably determined to be payable during the12

5-year period beginning on the first day of13

the plan year, the first segment rate with14

respect to the applicable month,15

‘‘(ii) in the case of liabilities reason-16


15-year period beginning at the end of the18

period described in clause (i), the second19

segment rate with respect to the applicable20

month, and21

‘‘(iii) in the case of liabilities reason-22

ably determined to be payable after the pe-23

riod described in clause (ii), the third seg-24

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42

H.L.C.

ment rate with respect to the applicable1

month.2

‘‘(C) SEGMENT RATES.—For purposes of3

this paragraph—4

‘‘(i) FIRST SEGMENT RATE.—The5

term ‘first segment rate’ means, with re-6

spect to any month, the single rate of in-7

terest which shall be determined by the8

Secretary of the Treasury for such month9

on the basis of the corporate bond yield10

curve for such month, taking into account11

only that portion of such yield curve which12

is based on bonds maturing during the 5-13

year period commencing with such month.14

‘‘(ii) SECOND SEGMENT RATE.—The15

term ‘second segment rate’ means, with re-16







is based on bonds maturing during the 15-23

year period beginning at the end of the pe-24

riod described in clause (i).25

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43

H.L.C.

‘‘(iii) THIRD SEGMENT RATE.—The1

term ‘third segment rate’ means, with re-2







is based on bonds maturing during periods9

beginning after the period described in10

clause (ii).11

‘‘(D) CORPORATE BOND YIELD CURVE.—12

For purposes of this paragraph—13

‘‘(i) IN GENERAL.—The term ‘cor-14

porate bond yield curve’ means, with re-15

spect to any month, a yield curve which is16

prescribed by the Secretary of the Treas-17

ury for such month and which reflects a 3-18

year weighted average of yields on invest-19

ment grade corporate bonds with varying20

maturities.21

‘‘(ii) 3-YEAR WEIGHTED AVERAGE.—22

The term ‘3-year weighted average’ means23

an average determined by using a method-24

ology under which the most recent year is25

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44

H.L.C.

weighted 50 percent, the year preceding1

such year is weighted 35 percent, and the2

second year preceding such year is weight-3

ed 15 percent.4

‘‘(E) APPLICABLE MONTH.—For purposes5

of this paragraph, the term ‘applicable month’6

means, with respect to any plan for any plan7

year, the month which includes the valuation8

date of such plan for such plan year or, at the9

election of the plan sponsor, any of the 410

months which precede such month. Any election11

made under this subparagraph shall apply to12

the plan year for which the election is made and13

all succeeding plan years, unless the election is14

revoked with the consent of the Secretary of the15

Treasury.16

‘‘(F) PUBLICATION REQUIREMENTS.—The17

Secretary of the Treasury shall publish for each18

month the corporate bond yield curve (and the19

corporate bond yield curve reflecting the modi-20

fication described in section21

205(g)(3)(B)(iii)(I)) for such month and each22

of the rates determined under subparagraph23

(B) for such month. The Secretary of the24

Treasury shall also publish a description of the25

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45

H.L.C.

methodology used to determine such yield curve1

and such rates which is sufficiently detailed to2

enable plans to make reasonable projections re-3

garding the yield curve and such rates for fu-4

ture months based on the plan’s projection of5

future interest rates.6

‘‘(G) TRANSITION RULE.—7

‘‘(i) IN GENERAL.—Notwithstanding8

the preceding provisions of this paragraph,9

for plan years beginning in 2007 or 2008,10

the first, second, or third segment rate for11

a plan with respect to any month shall be12

equal to the sum of—13

‘‘(I) the product of such rate for14

such month determined without re-15

gard to this subparagraph, multiplied16

by the applicable percentage, and17

‘‘(II) the product of the rate de-18

termined under the rules of section19

302(b)(5)(B)(ii)(II) (as in effect for20

plan years beginning in 2006), multi-21

plied by a percentage equal to 10022

percent minus the applicable percent-23

age.24

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H.L.C.

‘‘(ii) APPLICABLE PERCENTAGE.—For1

purposes of clause (i), the applicable per-2

centage is 331⁄3 percent for plan years be-3

ginning in 2007 and 662⁄3 percent for plan4

years beginning in 2008.5

‘‘(iii) NEW PLANS INELIGIBLE.—6

Clause (i) shall not apply to any plan if the7

first plan year of the plan begins after De-8

cember 31, 2006.9

‘‘(3) MORTALITY TABLE.—10


subparagraph (B), the mortality table used in12

determining any present value or making any13

computation under this section shall be the14

RP–2000 Combined Mortality Table using15

Scale AA published by the Society of Actuaries16

(as in effect on the date of the enactment of the17

Pension Protection Act of 2005), projected as18

of the plan’s valuation date.19

‘‘(B) SUBSTITUTE MORTALITY TABLE.—20

‘‘(i) IN GENERAL.—Upon request by21

the plan sponsor and approval by the Sec-22

retary of the Treasury for a period not to23

exceed 10 years, a mortality table which24

meets the requirements of clause (ii) shall25

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H.L.C.

be used in determining any present value1

or making any computation under this sec-2

tion. A mortality table described in this3

clause shall cease to be in effect if the plan4

actuary determines at any time that such5

table does not meet the requirements of6

subclauses (I) and (II) of clause (ii).7

‘‘(ii) REQUIREMENTS.—A mortality8

table meets the requirements of this clause9

if the Secretary of the Treasury determines10

that—11

‘‘(I) such table reflects the actual12

experience of the pension plan and13

projected trends in such experience,14

and15

‘‘(II) such table is significantly16

different from the table described in17

subparagraph (A).18

‘‘(iii) DEADLINE FOR DISPOSITION OF19

APPLICATION.—Any mortality table sub-20

mitted to the Secretary of the Treasury for21

approval under this subparagraph shall be22

treated as in effect for the succeeding plan23

year unless such Secretary, during the24

180-day period beginning on the date of25

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48

H.L.C.

such submission, disapproves of such table1

and provides the reasons that such table2

fails to meet the requirements of clause3

(ii).4

‘‘(C) TRANSITION RULE.—Under regula-5

tions of the Secretary of the Treasury, any dif-6

ference in present value resulting from the dif-7

ference in the assumptions as set forth in the8

mortality table specified in subparagraph (A)9

and the assumptions as set forth in the mor-10

tality table described in section 302(d)(7)(C)(ii)11

(as in effect for plan years beginning in 2006)12

shall be phased in ratably over the first period13

of 5 plan years beginning in or after 2007 so14

as to be fully effective for the fifth plan year.15

The preceding sentence shall not apply to any16

plan if the first plan year of the plan begins17

after December 31, 2006.18

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN19

THE FORM OF LUMP SUMS OR OTHER OPTIONAL20

FORMS.—For purposes of determining any present21

value or making any computation under this section,22

there shall be taken into account—23

‘‘(A) the probability that future benefit24

payments under the plan will be made in the25

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49

H.L.C.

form of optional forms of benefits provided1

under the plan (including lump sum distribu-2

tions, determined on the basis of the plan’s ex-3

perience and other related assumptions), and4

‘‘(B) any difference in the present value of5

such future benefit payments resulting from the6

use of actuarial assumptions, in determining7

benefit payments in any such optional form of8

benefits, which are different from those speci-9

fied in this subsection.10

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU-11

ARIAL ASSUMPTIONS.—12

‘‘(A) IN GENERAL.—No actuarial assump-13

tion used to determine the funding target for a14

plan to which this paragraph applies may be15

changed without the approval of the Secretary16

of the Treasury.17

‘‘(B) PLANS TO WHICH PARAGRAPH AP-18

PLIES.—This paragraph shall apply to a plan19

only if—20

‘‘(i) the plan is a single-employer plan21

to which title IV applies,22

‘‘(ii) the aggregate unfunded vested23

benefits as of the close of the preceding24

plan year (as determined under section25

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H.L.C.

4006(a)(3)(E)(iii)) of such plan and all1

other plans maintained by the contributing2

sponsors (as defined in section3

4001(a)(13)) and members of such spon-4

sors’ controlled groups (as defined in sec-5

tion 4001(a)(14)) which are covered by6

title IV (disregarding plans with no un-7

funded vested benefits) exceed8

$50,000,000, and9

‘‘(iii) the change in assumptions (de-10

termined after taking into account any11

changes in interest rate and mortality12

table) results in a decrease in the funding13

shortfall of the plan for the current plan14

year that exceeds $50,000,000, or that ex-15

ceeds $5,000,000 and that is 5 percent or16

more of the funding target of the plan be-17

fore such change.18

‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—19

‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK20

STATUS.—21


a plan is in at-risk status for a plan year, the23

funding target of the plan for the plan year is24

the sum of—25

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51

H.L.C.

‘‘(i) the present value of all liabilities1

to participants and their beneficiaries2

under the plan for the plan year, as deter-3

mined by using, in addition to the actu-4

arial assumptions described in subsection5

(h), the supplemental actuarial assump-6

tions described in subparagraph (B), plus7

‘‘(ii) a loading factor determined8

under subparagraph (C).9

‘‘(B) SUPPLEMENTAL ACTUARIAL ASSUMP-10

TIONS.—The actuarial assumptions used in de-11

termining the valuation of the funding target12

shall include, in addition to the actuarial as-13

sumptions described in subsection (h), an as-14

sumption that all participants will elect benefits15

at such times and in such forms as will result16

in the highest present value of liabilities under17

subparagraph (A)(i).18

‘‘(C) LOADING FACTOR.—The loading fac-19

tor applied with respect to a plan under this20

paragraph for any plan year is the sum of—21

‘‘(i) $700, times the number of par-22

ticipants in the plan, plus23

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52

H.L.C.

‘‘(ii) 4 percent of the funding target1

(determined without regard to this para-2

graph) of the plan for the plan year.3

‘‘(2) TARGET NORMAL COST OF AT-RISK4

PLANS.—In any case in which a plan is in at-risk5

status for a plan year, the target normal cost of the6

plan for such plan year shall be the sum of—7

‘‘(A) the present value of all benefits which8

are expected to accrue or be earned under the9

plan during the plan year, determined under10

the actuarial assumptions used under para-11

graph (1), plus12

‘‘(B) the loading factor under paragraph13

(1)(C), excluding the portion of the loading fac-14

tor described in paragraph (1)(C)(i).15

‘‘(3) DETERMINATION OF AT-RISK STATUS.—16

For purposes of this subsection, a plan is in ‘at-risk17

status’ for a plan year if the funding target attain-18

ment percentage of the plan for the preceding plan19

year was less than 60 percent.20

‘‘(4) TRANSITION BETWEEN APPLICABLE FUND-21

ING TARGETS AND BETWEEN APPLICABLE TARGET22

NORMAL COSTS.—23


a plan which is in at-risk status for a plan year25

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53

H.L.C.

has been in such status for a consecutive period1

of fewer than 5 plan years, the applicable2

amount of the funding target and of the target3

normal cost shall be, in lieu of the amount de-4

termined without regard to this paragraph, the5

sum of—6

‘‘(i) the amount determined under this7

section without regard to this subsection,8

plus9

‘‘(ii) the transition percentage for10

such plan year of the excess of the amount11

determined under this subsection (without12

regard to this paragraph) over the amount13

determined under this section without re-14

gard to this subsection.15

‘‘(B) TRANSITION PERCENTAGE.—For16

purposes of this paragraph, the ‘transition per-17

centage’ for a plan year is the product derived18

by multiplying—19

‘‘(i) 20 percent, by20

‘‘(ii) the number of plan years during21

the period described in subparagraph (A).22

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU-23

TIONS.—24

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54

H.L.C.


tion, the due date for any payment of any minimum2

required contribution for any plan year shall be 81⁄23

months after the close of the plan year.4

‘‘(2) INTEREST.—Any payment required under5

paragraph (1) for a plan year that is made on a date6

other than the valuation date for such plan year7

shall be adjusted for interest accruing for the period8

between the valuation date and the payment date, at9

the effective rate of interest for the plan for such10

plan year.11

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION12

SCHEDULE FOR UNDERFUNDED PLANS.—13

‘‘(A) INTEREST PENALTY FOR FAILURE TO14

MEET ACCELERATED QUARTERLY PAYMENT15

SCHEDULE.—In any case in which the plan has16

a funding shortfall for the preceding plan year,17

if the required installment is not paid in full,18

then the minimum required contribution for the19

plan year (as increased under paragraph (2))20

shall be further increased by an amount equal21

to the interest on the amount of the under-22

payment for the period of the underpayment,23

using an interest rate equal to the excess of—24

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55

H.L.C.

‘‘(i) 175 percent of the Federal mid-1

term rate (as in effect under section 12742

for the 1st month of such plan year), over3

‘‘(ii) the effective rate of interest for4

the plan for the plan year.5

‘‘(B) AMOUNT OF UNDERPAYMENT, PE-6

RIOD OF UNDERPAYMENT.—For purposes of7

subparagraph (A)—8

‘‘(i) AMOUNT.—The amount of the9

underpayment shall be the excess of—10

‘‘(I) the required installment,11

over12

‘‘(II) the amount (if any) of the13

installment contributed to or under14

the plan on or before the due date for15

the installment.16

‘‘(ii) PERIOD OF UNDERPAYMENT.—17

The period for which any interest is18

charged under this paragraph with respect19

to any portion of the underpayment shall20

run from the due date for the installment21

to the date on which such portion is con-22

tributed to or under the plan.23

‘‘(iii) ORDER OF CREDITING CON-24

TRIBUTIONS.—For purposes of clause25

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56

H.L.C.

(i)(II), contributions shall be credited1

against unpaid required installments in the2

order in which such installments are re-3

quired to be paid.4

‘‘(C) NUMBER OF REQUIRED INSTALL-5

MENTS; DUE DATES.—For purposes of this6

paragraph—7

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—8

There shall be 4 required installments for9

each plan year.10

‘‘(ii) TIME FOR PAYMENT OF IN-11

STALLMENTS.—The due dates for required12

installments are set forth in the following13

table:14

‘‘In the case of the followingrequired installment:

The due date is:

1st ........................................................................... April 15

2nd ......................................................................... July 15

3rd .......................................................................... October 15

4th .......................................................................... January 15 of the fol-

lowing year

‘‘(D) AMOUNT OF REQUIRED INSTALL-15

MENT.—For purposes of this paragraph—16

‘‘(i) IN GENERAL.—The amount of17

any required installment shall be 25 per-18

cent of the required annual payment.19

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57

H.L.C.

‘‘(ii) REQUIRED ANNUAL PAYMENT.—1

For purposes of clause (i), the term ‘re-2

quired annual payment’ means the lesser3

of—4

‘‘(I) 90 percent of the minimum5

required contribution (without regard6

to any waiver under section 302(c)) to7

the plan for the plan year under this8

section, or9

‘‘(II) in the case of a plan year10

beginning after 2007, 100 percent of11

the minimum required contribution12

(without regard to any waiver under13

section 302(c)) to the plan for the14

preceding plan year.15

Subclause (II) shall not apply if the pre-16

ceding plan year referred to in such clause17

was not a year of 12 months.18

‘‘(E) FISCAL YEARS AND SHORT YEARS.—19

‘‘(i) FISCAL YEARS.—In applying this20

paragraph to a plan year beginning on any21

date other than January 1, there shall be22

substituted for the months specified in this23

paragraph, the months which correspond24

thereto.25

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58

H.L.C.

‘‘(ii) SHORT PLAN YEAR.—This sub-1

paragraph shall be applied to plan years of2

less than 12 months in accordance with3

regulations prescribed by the Secretary of4

the Treasury.5

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION6

WITH QUARTERLY CONTRIBUTIONS.—7

‘‘(A) IN GENERAL.—A plan to which this8

paragraph applies shall be treated as failing to9

pay the full amount of any required installment10

under paragraph (3) to the extent that the11

value of the liquid assets paid in such install-12

ment is less than the liquidity shortfall (wheth-13

er or not such liquidity shortfall exceeds the14

amount of such installment required to be paid15

but for this paragraph).16



(other than a plan that would be described in19

subsection (f)(2)(B) if ‘100’ were substituted20

for ‘500’ therein) which—21

‘‘(i) is required to pay installments22

under paragraph (3) for a plan year, and23

‘‘(ii) has a liquidity shortfall for any24

quarter during such plan year.25

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59

H.L.C.

‘‘(C) PERIOD OF UNDERPAYMENT.—For1

purposes of paragraph (3)(A), any portion of an2

installment that is treated as not paid under3

subparagraph (A) shall continue to be treated4

as unpaid until the close of the quarter in5

which the due date for such installment occurs.6

‘‘(D) LIMITATION ON INCREASE.—If the7

amount of any required installment is increased8

by reason of subparagraph (A), in no event9

shall such increase exceed the amount which,10

when added to prior installments for the plan11

year, is necessary to increase the funding target12

attainment percentage of the plan for the plan13

year (taking into account the expected increase14

in funding target due to benefits accruing or15

earned during the plan year) to 100 percent.16

‘‘(E) DEFINITIONS.—For purposes of this17

subparagraph:18

‘‘(i) LIQUIDITY SHORTFALL.—The19

term ‘liquidity shortfall’ means, with re-20

spect to any required installment, an21

amount equal to the excess (as of the last22

day of the quarter for which such install-23

ment is made) of—24

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60

H.L.C.

‘‘(I) the base amount with re-1

spect to such quarter, over2

‘‘(II) the value (as of such last3

day) of the plan’s liquid assets.4

‘‘(ii) BASE AMOUNT.—5


‘base amount’ means, with respect to7

any quarter, an amount equal to 38

times the sum of the adjusted dis-9

bursements from the plan for the 1210

months ending on the last day of such11

quarter.12

‘‘(II) SPECIAL RULE.—If the13

amount determined under subclause14

(I) exceeds an amount equal to 215



months ending on the last day of the18

quarter and an enrolled actuary cer-19

tifies to the satisfaction of the Sec-20

retary of the Treasury that such ex-21

cess is the result of nonrecurring cir-22

cumstances, the base amount with re-23

spect to such quarter shall be deter-24

mined without regard to amounts re-25

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61

H.L.C.

lated to those nonrecurring cir-1

cumstances.2

‘‘(iii) DISBURSEMENTS FROM THE3

PLAN.—The term ‘disbursements from the4

plan’ means all disbursements from the5

trust, including purchases of annuities,6

payments of single sums and other bene-7

fits, and administrative expenses.8

‘‘(iv) ADJUSTED DISBURSEMENTS.—9

The term ‘adjusted disbursements’ means10

disbursements from the plan reduced by11

the product of—12

‘‘(I) the plan’s funding target at-13

tainment percentage for the plan year,14

and15

‘‘(II) the sum of the purchases of16

annuities, payments of single sums,17

and such other disbursements as the18

Secretary of the Treasury shall pro-19

vide in regulations.20

‘‘(v) LIQUID ASSETS.—The term ‘liq-21

uid assets’ means cash, marketable securi-22

ties, and such other assets as specified by23

the Secretary of the Treasury in regula-24

tions.25

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62

H.L.C.

‘‘(vi) QUARTER.—The term ‘quarter’1

means, with respect to any required install-2

ment, the 3-month period preceding the3

month in which the due date for such in-4

stallment occurs.5

‘‘(F) REGULATIONS.—The Secretary of the6

Treasury may prescribe such regulations as are7

necessary to carry out this paragraph.8

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO9

MAKE REQUIRED CONTRIBUTIONS.—10

‘‘(1) IN GENERAL.—In the case of a plan to11

which this subsection applies (as provided under12

paragraph (2)), if—13

‘‘(A) any person fails to make a contribu-14

tion payment required by section 302 and this15

section before the due date for such payment,16

and17

‘‘(B) the unpaid balance of such payment18

(including interest), when added to the aggre-19

gate unpaid balance of all preceding such pay-20

ments for which payment was not made before21

the due date (including interest), exceeds22

$1,000,000,23

then there shall be a lien in favor of the plan in the24

amount determined under paragraph (3) upon all25

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63

H.L.C.

property and rights to property, whether real or per-1

sonal, belonging to such person and any other per-2

son who is a member of the same controlled group3

of which such person is a member.4

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—5

This subsection shall apply to a single-employer plan6

for any plan year for which the funding target at-7

tainment percentage (as defined in subsection8

(d)(2)) of such plan is less than 100 percent. This9

subsection shall not apply to any plan to which sec-10

tion 4021 does not apply (as such section is in effect11

on the date of the enactment of the Pension Protec-12

tion Act of 2005).13

‘‘(3) AMOUNT OF LIEN.—For purposes of para-14

graph (1), the amount of the lien shall be equal to15

the aggregate unpaid balance of contribution pay-16

ments required under this section and section 30217

for which payment has not been made before the due18

date.19

‘‘(4) NOTICE OF FAILURE; LIEN.—20

‘‘(A) NOTICE OF FAILURE.—A person21

committing a failure described in paragraph (1)22

shall notify the Pension Benefit Guaranty Cor-23

poration of such failure within 10 days of the24

due date for the required contribution payment.25

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64

H.L.C.

‘‘(B) PERIOD OF LIEN.—The lien imposed1

by paragraph (1) shall arise on the due date for2

the required contribution payment and shall3

continue until the last day of the first plan year4

in which the plan ceases to be described in5

paragraph (1)(B). Such lien shall continue to6

run without regard to whether such plan con-7

tinues to be described in paragraph (2) during8

the period referred to in the preceding sentence.9

‘‘(C) CERTAIN RULES TO APPLY.—Any10

amount with respect to which a lien is imposed11

under paragraph (1) shall be treated as taxes12

due and owing the United States and rules13

similar to the rules of subsections (c), (d), and14

(e) of section 4068 shall apply with respect to15

a lien imposed by subsection (a) and the16

amount with respect to such lien.17

‘‘(5) ENFORCEMENT.—Any lien created under18

paragraph (1) may be perfected and enforced only19

by the Pension Benefit Guaranty Corporation, or at20

the direction of the Pension Benefit Guaranty Cor-21

poration, by the contributing sponsor (or any mem-22

ber of the controlled group of the contributing spon-23

sor).24

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65

H.L.C.

‘‘(6) DEFINITIONS.—For purposes of this1

subsection—2

‘‘(A) CONTRIBUTION PAYMENT.—The term3

‘contribution payment’ means, in connection4

with a plan, a contribution payment required to5

be made to the plan, including any required in-6

stallment under paragraphs (3) and (4) of sub-7

section (i).8

‘‘(B) DUE DATE; REQUIRED INSTALL-9

MENT.—The terms ‘due date’ and ‘required in-10

stallment’ have the meanings given such terms11

by subsection (j), except that in the case of a12

payment other than a required installment, the13

due date shall be the date such payment is re-14

quired to be made under section 303.15

‘‘(C) CONTROLLED GROUP.—The term16

‘controlled group’ means any group treated as17

a single employer under subsections (b), (c),18

(m), and (o) of section 414 of the Internal Rev-19

enue Code of 1986.20

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT21

ACCOUNTS.—In the case of a qualified transfer (as de-22

fined in section 420 of the Internal Revenue Code of23

1986), any assets so transferred shall not, for purposes24

of this section, be treated as assets in the plan.’’.25

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66

H.L.C.

(b) CLERICAL AMENDMENT.—The table of sections1

in section 1 of such Act (as amended by section 101) is2

amended by inserting after the item relating to section3

302 the following new item:4

‘‘Sec. 303. Minimum funding standards for single-employer defined benefit pen-

sion plans.’’.

(c) EFFECTIVE DATE.—The amendments made by5

this section shall apply with respect to plan years begin-6

ning after 2006.7

SEC. 103. BENEFIT LIMITATIONS UNDER SINGLE-EM-8

PLOYER PLANS.9

(a) PROHIBITION OF SHUTDOWN BENEFITS AND10

OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS11

UNDER SINGLE-EMPLOYER PLANS.—Section 206 of the12

Employee Retirement Income Security Act of 1974 (2913

U.S.C. 1056) is amended by adding at the end the fol-14

lowing new subsection:15

‘‘(g) FUNDING-BASED LIMITATION ON SHUTDOWN16

BENEFITS AND OTHER UNPREDICTABLE CONTINGENT17

EVENT BENEFITS UNDER SINGLE-EMPLOYER PLANS.—18

‘‘(1) IN GENERAL.—No defined benefit plan19

which is a single-employer plan may provide benefits20

to which participants are entitled solely by reason of21

the occurrence of a plant shutdown or any other un-22

predictable contingent event occurring during any23

plan year if the funding target attainment percent-24

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age as of the valuation date of the plan for such1

plan year—2

‘‘(A) is less than 80 percent, or3

‘‘(B) would be less than 80 percent taking4

into account such occurrence.5

‘‘(2) EXEMPTION.—Paragraph (1) shall cease6

to apply with respect to any plan year, effective as7

of the first date of the plan year, upon payment by8

the plan sponsor of a contribution (in addition to9

any minimum required contribution under section10

303) equal to—11

‘‘(A) in the case of paragraph (1)(A), the12

amount of the increase in the funding target of13

the plan (under section 303) for the plan year14

attributable to the occurrence referred to in15

paragraph (1), and16

‘‘(B) in the case of paragraph (1)(B), the17

amount sufficient to result in a funding target18

attainment percentage of 80 percent.19

Rules similar to the rules of subsection (h)(6) shall20

apply for purposes of this paragraph.21

‘‘(3) UNPREDICTABLE CONTINGENT EVENT.—22

For purposes of this subsection, the term ‘unpredict-23

able contingent event’ means an event other than—24

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H.L.C.

‘‘(A) attainment of any age, performance1

of any service, receipt or derivation of any com-2

pensation, or the occurrence of death or dis-3

ability, or4

‘‘(B) an event which is reasonably and reli-5

ably predictable (as determined by the Sec-6

retary of the Treasury).7

‘‘(4) NEW PLANS.—Paragraph (1) shall not8

apply to a plan for the first 5 plan years of the plan.9

For purposes of this subsection, the reference in this10

subsection to a plan shall include a reference to any11

predecessor plan.12

‘‘(5) DEEMED REDUCTION OF FUNDING BAL-13

ANCES.—A rule similar to the rule of subsection14

(h)(8) shall apply for purposes of this subsection.’’.15

(b) OTHER LIMITS ON BENEFITS AND BENEFIT AC-16

CRUALS.—17

(1) IN GENERAL.—Section 206 of such Act (as18

amended by subsection (a)) is amended further by19

adding at the end the following new subsection:20

‘‘(h) FUNDING-BASED LIMITS ON BENEFITS AND21

BENEFIT ACCRUALS UNDER SINGLE-EMPLOYER22

PLANS.—23

‘‘(1) LIMITATIONS ON PLAN AMENDMENTS IN-24

CREASING LIABILITY FOR BENEFITS.—25

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69

H.L.C.

‘‘(A) IN GENERAL.—No amendment to a1

defined benefit plan which is a single-employer2

plan which has the effect of increasing liabilities3

of the plan by reason of increases in benefits,4

establishment of new benefits, changing the5

rate of benefit accrual, or changing the rate at6

which benefits become nonforfeitable to the plan7

may take effect during any plan year if the8

funding target attainment percentage as of the9

valuation date of the plan for such plan year10

is—11

‘‘(i) less than 80 percent, or12

‘‘(ii) would be less than 80 percent13

taking into account such amendment.14

For purposes of this subparagraph, any in-15

crease in benefits under the plan by reason of16

an increase in the benefit rate provided under17

the plan or on the basis of an increase in com-18

pensation shall be treated as effected by plan19

amendment.20

‘‘(B) EXEMPTION.—Subparagraph (A)21

shall cease to apply with respect to any plan22

year, effective as of the first date of the plan23

year (or if later, the effective date of the24

amendment), upon payment by the plan sponsor25

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H.L.C.

of a contribution (in addition to any minimum1

required contribution under section 303) equal2

to—3

‘‘(i) in the case of subparagraph4

(A)(i), the amount of the increase in the5

funding target of the plan (under section6

303) for the plan year attributable to the7

amendment, and8

‘‘(ii) in the case of subparagraph9

(A)(ii), the amount sufficient to result in a10

funding target attainment percentage of 8011

percent.12

‘‘(2) FUNDING-BASED LIMITATION ON CERTAIN13

FORMS OF DISTRIBUTION.—14

‘‘(A) IN GENERAL.—A defined benefit plan15

which is a single-employer plan shall provide16

that, in any case in which the plan’s funding17

target attainment percentage as of the valu-18

ation date of the plan for a plan year is less19

than 80 percent, the plan may not after such20

date pay any prohibited payment (as defined in21

section 206(e)).22

‘‘(B) EXCEPTION.—Subparagraph (A)23

shall not apply to any plan for any plan year24

if the terms of such plan (as in effect for the25

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71

H.L.C.

period beginning on June 29, 2005, and ending1

with such plan year) provide for no benefit ac-2

cruals with respect to any participant during3

such period.4

‘‘(3) LIMITATIONS ON BENEFIT ACCRUALS FOR5

PLANS WITH SEVERE FUNDING SHORTFALLS.—A de-6

fined benefit plan which is a single-employer plan7

shall provide that, in any case in which the plan’s8

funding target attainment percentage as of the valu-9

ation date of the plan for a plan year is less than10

60 percent, all future benefit accruals under the11

plan shall cease as of such date.12

‘‘(4) NEW PLANS.—Paragraphs (1) and (3)13

shall not apply to a plan for the first 5 plan years14

of the plan. For purposes of this subsection, the ref-15

erence in this subsection to a plan shall include a16

reference to any predecessor plan.17

‘‘(5) PRESUMED UNDERFUNDING FOR PUR-18

POSES OF BENEFIT LIMITATIONS BASED ON PRIOR19

YEAR’S FUNDING STATUS.—20

‘‘(A) PRESUMPTION OF CONTINUED21

UNDERFUNDING.—In any case in which a ben-22

efit limitation under paragraph (1), (2), or (3)23

has been applied to a plan with respect to the24

plan year preceding the current plan year, the25

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72

H.L.C.

funding target attainment percentage of the1

plan as of the valuation date of the plan for the2

current plan year shall be presumed to be equal3

to the funding target attainment percentage of4

the plan as of the valuation date of the plan for5

the preceding plan year until the enrolled actu-6

ary of the plan certifies the actual funding tar-7

get attainment percentage of the plan as of the8

valuation date of the plan for the current plan9

year.10

‘‘(B) PRESUMPTION OF UNDERFUNDING11

AFTER 10TH MONTH.—In any case in which no12

such certification is made with respect to the13

plan before the first day of the 10th month of14

the current plan year, for purposes of para-15

graphs (1), (2), and (3), the plan’s funding tar-16

get attainment percentage shall be conclusively17

presumed to be less than 60 percent as of the18

first day of such 10th month, and such day19

shall be deemed, for purposes of such sub-20

sections, to be the valuation date of the plan for21

the current plan year.22

‘‘(C) PRESUMPTION OF UNDERFUNDING23

AFTER 4TH MONTH FOR NEARLY UNDER-24

FUNDED PLANS.—In any case in which—25

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H.L.C.

‘‘(i) a benefit limitation under para-1

graph (1), (2), or (3) did not apply to a2

plan with respect to the plan year pre-3

ceding the current plan year, but the fund-4

ing target attainment percentage of the5

plan for such preceding plan year was not6

more than 10 percentage points greater7

than the percentage which would have8

caused such subsection to apply to the plan9

with respect to such preceding plan year,10

and11

‘‘(ii) as of the first day of the 4th12

month of the current plan year, the en-13

rolled actuary of the plan has not certified14

the actual funding target attainment per-15

centage of the plan as of the valuation date16

of the plan for the current plan year,17

until the enrolled actuary so certifies, such first18

day shall be deemed, for purposes of such sub-19

section, to be the valuation date of the plan for20

the current plan year and the funding target at-21

tainment percentage of the plan as of such first22

day shall, for purposes of such paragraph, be23

presumed to be equal to 10 percentage points24

less than the funding target attainment per-25

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74

H.L.C.

centage of the plan as of the valuation date of1

the plan for such preceding plan year.2

‘‘(6) RESTORATION BY PLAN AMENDMENT OF3

BENEFITS OR BENEFIT ACCRUAL.—In any case in4

which a prohibition under paragraph (2) of a pay-5

ment described in paragraph (2)(A) or a cessation of6

benefit accruals under paragraph (3) is applied to a7

plan with respect to any plan year and such prohibi-8

tion or cessation, as the case may be, ceases to apply9

to any subsequent plan year, the plan may provide10

for the resumption of such benefit payment or such11

benefit accrual only by means of the adoption of a12

plan amendment after the valuation date of the plan13

for such subsequent plan year. The preceding sen-14

tence shall not apply to a prohibition or cessation re-15

quired by reason of paragraph (5).16


AGE.—18

‘‘(A) IN GENERAL.—For purposes of this19

subsection, the term ‘funding target attainment20

percentage’ means, with respect to any plan for21

any plan year, the ratio (expressed as a per-22

centage) which—23



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75

H.L.C.

303(g)) reduced by the pre-funding bal-1

ance and the funding standard carryover2

balance (within the meaning of section3

303(f)), bears to4


the plan year (as determined under section6

303(d)(1), but without regard to section7

303(i)(1)).8

‘‘(B) APPLICATION TO PLANS WHICH ARE9

FULLY FUNDED WITHOUT REGARD TO REDUC-10

TIONS FOR FUNDING BALANCES.—11


plan for any plan year, if the funding tar-13

get attainment percentage is 100 percent14

or more (determined without regard to this15

subparagraph and without regard to the16

reduction under subparagraph (A)(i) for17


standard carryover balance), subparagraph19

(A) shall be applied without regard to such20

reduction.21

‘‘(ii) TRANSITION RULE.—Clause (i)22

shall be applied to plan years beginning23

after 2006 and before 2011 by substituting24

for ‘100 percent’ the applicable percentage25

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76

H.L.C.

determined in accordance with the fol-1

lowing table:2




‘‘(iii) LIMITATION.—Clause (ii) shall3


after 2007 unless the funding target at-5

tainment percentage (determined without6

regard to this subparagraph and without7

regard to the reduction under subpara-8

graph (A)(i) for the pre-funding balance9

and the funding standard carryover bal-10

ance) of the plan for each preceding plan11

year after 2006 was not less than the ap-12

plicable percentage with respect to such13

preceding plan year determined under14

clause (ii).15

‘‘(8) DEEMED REDUCTION OF FUNDING BAL-16

ANCES.—In the case of a plan maintained pursuant17

to 1 or more collective bargaining agreements be-18

tween employee representatives and 1 or more19

employers—20

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77

H.L.C.


a benefit limitation under paragraph (1), (2), or2

(3) would (but for this paragraph and deter-3

mined without regard to paragraph (1)(B))4

apply to such plan for the plan year, the plan5

sponsor of such plan shall be treated for pur-6

poses of this Act as having made an election7

under section 303(f)(5) to reduce the balance of8


ard carryover balance for the plan year (in a10

manner consistent with the requirements of sec-11

tion 303(f)(5)(B)) by such amount as is nec-12

essary for such benefit limitation to not apply13

to the plan for such plan year.14

‘‘(B) EXCEPTION FOR INSUFFICIENT15

FUNDING BALANCES.—Subparagraph (A) shall16

not apply with respect to a benefit limitation17

for any plan year if the application of subpara-18

graph (A) would not result in the benefit limita-19

tion not applying for such plan year.’’.20

(2) NOTICE REQUIREMENT.—21

(A) IN GENERAL.—Section 101 of such22

Act (29 U.S.C. 1021) is amended—23

(i) by redesignating subsection (j) as24

subsection (k); and25

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78

H.L.C.

(ii) by inserting after subsection (i)1

the following new subsection:2

‘‘(j) NOTICE OF FUNDING-BASED LIMITATION ON3

CERTAIN FORMS OF DISTRIBUTION.—The plan adminis-4

trator of a defined benefit plan which is a single-employer5

plan shall provide a written notice to plan participants and6

beneficiaries within 30 days after the plan has become7

subject to the restriction described in section 206(h)(2)8

or at such other time as may be determined by the Sec-9

retary.’’.10

(B) ENFORCEMENT.—Section 502(c)(4) of11

such Act (29 U.S.C. 1132(c)(4)) is amended by12

striking ‘‘section 302(b)(7)(F)(vi)’’ and insert-13

ing ‘‘sections 101(j) and 302(b)(7)(F)(vi)’’.14

(c) EFFECTIVE DATE.—15

(1) SHUTDOWN BENEFITS.—Except as provided16

in paragraph (3), the amendments made by sub-17

section (a) shall apply with respect to plant shut-18

downs, or other unpredictable contingent events, oc-19

curring after 2006.20

(2) OTHER BENEFITS.—Except as provided in21

paragraph (3), the amendments made by subsection22

(b) shall apply with respect to plan years beginning23

after 2006.24

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79

H.L.C.

(3) COLLECTIVE BARGAINING EXCEPTION.—In1

the case of a plan maintained pursuant to 1 or more2

collective bargaining agreements between employee3

representatives and 1 or more employers ratified be-4

fore the date of the enactment of this Act, the5

amendments made by this subsection shall not apply6

to plan years beginning before the earlier of—7

(A) the later of—8

(i) the date on which the last collec-9

tive bargaining agreement relating to the10

plan terminates (determined without re-11

gard to any extension thereof agreed to12

after the date of the enactment of this13

Act), or14

(ii) the first day of the first plan year15

to which the amendments made by this16

subsection would (but for this subpara-17

graph) apply, or18

(B) January 1, 2009.19

For purposes of clause (i), any plan amendment20

made pursuant to a collective bargaining agreement21

relating to the plan which amends the plan solely to22

conform to any requirement added by this subsection23

shall not be treated as a termination of such collec-24

tive bargaining agreement.25

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80

H.L.C.

(d) SPECIAL RULE FOR 2007.—For purposes of ap-1

plying paragraph (5) of section 206(h) of such Act (as2

added by this section) to current plan years (within the3

meaning of such paragraph) beginning in 2007, the modi-4

fied funded current liability percentage of the plan for the5

preceding year shall be substituted for the funding target6

attainment percentage of the plan for the preceding year.7

For purposes of the preceding sentence, the term ‘‘modi-8

fied funded current liability percentage’’ means the funded9

current liability percentage (as defined in section 302(l)(8)10

of such Act), reduced as described in subparagraph (E)11

thereof in the case of a plan with a funded current liability12

percentage (as so defined and before such reduction)13

which is less than 100 percent.14

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.15

(a) MISCELLANEOUS AMENDMENTS TO TITLE I.—16

Subtitle B of title I of the Employee Retirement Income17

Security Act of 1974 (29 U.S.C. 1021 et seq.) is18

amended—19

(1) in section 101(d)(3), by striking ‘‘section20

302(e)’’ and inserting ‘‘section 303(j)’’;21

(2) in section 101(f)(2)(B), by striking clause22

(i) and inserting the following:23

‘‘(i) a statement as to whether—24

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81

H.L.C.

‘‘(I) in the case of a defined ben-1

efit plan which is a single-employer2

plan, the plan’s funding target attain-3

ment percentage (as defined in section4

303(d)(2)), or5

‘‘(II) in the case of a defined6

benefit plan which is a multiemployer7

plan, the plan’s funded percentage (as8

defined in section 305(d)(2)),9

is at least 100 percent (and, if not, the ac-10

tual percentage);’’;11

(3) in section 103(d)(8)(B), by striking ‘‘the re-12

quirements of section 302(c)(3)’’ and inserting ‘‘the13

applicable requirements of sections 303(h) and14

304(c)(3)’’;15

(4) in section 103(d), by striking paragraph16

(11) and inserting the following:17

‘‘(11) If the current value of the assets of the18

plan is less than 70 percent of—19


which is a single-employer plan, the funding21

target (as defined in section 303(d)(1)) of the22

plan, or23

‘‘(B) in the case of a defined benefit plan24

which is a multiemployer plan, the current li-25

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82

H.L.C.

ability (as defined in section 304(c)(6)(D))1

under the plan,2

the percentage which such value is of the amount3

described in subparagraph (A) or (B).’’;4

(5) in section 203(a)(3)(C), by striking ‘‘section5

302(c)(8)’’ and inserting ‘‘section 302(d)(2)’’;6

(6) in section 204(g)(1), by striking ‘‘section7


(7) in section 204(i)(2)(B), by striking ‘‘section9


(8) in section 204(i)(3), by striking ‘‘funded11

current liability percentage (within the meaning of12

section 302(d)(8) of this Act)’’ and inserting ‘‘fund-13

ing target attainment percentage (as defined in sec-14

tion 303(d)(2))’’;15

(9) in section 204(i)(4), by striking ‘‘section16

302(c)(11)(A), without regard to section17

302(c)(11)(B)’’ and inserting ‘‘section 302(b)(1),18

without regard to section 302(b)(2)’’;19

(10) in section 206(e)(1), by striking ‘‘section20

302(d)’’ and inserting ‘‘section 303(j)(4)’’, and by21

striking ‘‘section 302(e)(5)’’ and inserting ‘‘section22

303(j)(4)(E)(i)’’;23

(11) in section 206(e)(3), by striking ‘‘section24

302(e) by reason of paragraph (5)(A) thereof’’ and25

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83

H.L.C.

inserting ‘‘section 303(j)(3) by reason of section1

303(j)(4)(A)’’; and2

(12) in sections 101(e)(3), 403(c)(1), and3

408(b)(13), by striking ‘‘American Jobs Creation4

Act of 2004’’ and inserting ‘‘Pension Protection Act5

of 2005’’.6

(b) MISCELLANEOUS AMENDMENTS TO TITLE IV.—7

Title IV of such Act is amended—8

(1) in section 4001(a)(13) (29 U.S.C.9

1301(a)(13)), by striking ‘‘302(c)(11)(A)’’ and in-10

serting ‘‘302(b)(1)’’, by striking ‘‘412(c)(11)(A)’’11

and inserting ‘‘412(b)(1)’’, by striking12

‘‘302(c)(11)(B)’’ and inserting ‘‘302(b)(2)’’, and by13

striking ‘‘412(c)(11)(B)’’ and inserting ‘‘412(b)(2)’’;14

(2) in section 4003(e)(1) (29 U.S.C.15

1303(e)(1)), by striking ‘‘302(f)(1)(A) and (B)’’ and16

inserting ‘‘303(k)(1)(A) and (B)’’, and by striking17

‘‘412(n)(1)(A) and (B)’’ and inserting18

‘‘430(k)(1)(A) and (B)’’;19

(3) in section 4010(b)(2) (29 U.S.C.20

1310(b)(2)), by striking ‘‘302(f)(1)(A) and (B)’’ and21

inserting ‘‘303(k)(1)(A) and (B)’’, and by striking22

‘‘412(n)(1)(A) and (B)’’ and inserting23

‘‘430(k)(1)(A) and (B)’’;24

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84

H.L.C.

(4) in section 4011(b) (29 U.S.C. 1311(b)), by1

striking ‘‘to which’’ and all that follows and insert-2

ing ‘‘for any plan year for which the plan’s funding3

target attainment percentage (as defined in section4

303(d)(2)) is at least 90 percent.’’;5

(5) in section 4062(c)(1) (29 U.S.C.6

1362(c)(1)), by striking paragraphs (1), (2), and (3)7

and inserting the following:8

‘‘(1)(A) in the case of a single-employer plan,9

the sum of the shortfall amortization charge (within10

the meaning of section 303(c)(1) of this Act and11

430(c)(1) of the Internal Revenue Code of 1986)12

with respect to the plan (if any) for the plan year13

in which the termination date occurs, plus the aggre-14

gate total of shortfall amortization installments (if15

any) determined for succeeding plan years under16

section 303(c)(2) of this Act and section 430(c)(2)17

of such Code (which, for purposes of this subpara-18

graph, shall include any increase in such sum which19

would result if all applications for waivers of the20

minimum funding standard under section 302(c) of21

this Act and section 412(c) of such Code which are22

pending with respect to such plan were denied and23

if no additional contributions (other than those al-24

ready made by the termination date) were made for25

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85

H.L.C.

the plan year in which the termination date occurs1

or for any previous plan year), or2

‘‘(B) in the case of a multiemployer plan, the3

outstanding balance of the accumulated funding de-4

ficiencies (within the meaning of section 304(a)(2)5

of this Act and section 431(a) of the Internal Rev-6

enue Code of 1986) of the plan (if any) (which, for7

purposes of this subparagraph, shall include the8

amount of any increase in such accumulated funding9

deficiencies of the plan which would result if all10

pending applications for waivers of the minimum11

funding standard under section 302(c) of this Act or12

section 412(c) of such Code and for extensions of13

the amortization period under section 304(d) of this14

Act or section 431(d) of such Code with respect to15

such plan were denied and if no additional contribu-16

tions (other than those already made by the termi-17

nation date) were made for the plan year in which18

the termination date occurs or for any previous plan19

year),20

‘‘(2)(A) in the case of a single-employer plan,21

the sum of the waiver amortization charge (within22

the meaning of section 303(e)(1) of this Act and23

430(j)(2) of the Internal Revenue Code of 1986)24

with respect to the plan (if any) for the plan year25

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86

H.L.C.

in which the termination date occurs, plus the aggre-1

gate total of waiver amortization installments (if2

any) determined for succeeding plan years under3

section 303(e)(2) of this Act and section 430(j)(3)4

of such Code, or5

‘‘(B) in the case of a multiemployer plan, the6

outstanding balance of the amount of waived fund-7

ing deficiencies of the plan waived before such date8

under section 302(c) of this Act or section 412(c) of9

such Code (if any), and10

‘‘(3) in the case of a multiemployer plan, the11

outstanding balance of the amount of decreases in12

the minimum funding standard allowed before such13

date under section 304(d) of this Act or section14

431(d) of such Code (if any);’’;15

(6) in section 4071 (29 U.S.C. 1371), by strik-16

ing ‘‘302(f)(4)’’ and inserting ‘‘303(k)(4)’’;17

(7) in section 4243(a)(1)(B) (29 U.S.C.18

1423(a)(1)(B)), by striking ‘‘302(a)’’ and inserting19

‘‘304(a)’’, and, in clause (i), by striking ‘‘302(a)’’20

and inserting ‘‘304(a)’’;21

(8) in section 4243(f)(1) (29 U.S.C.22

1423(f)(1)), by striking ‘‘303(a)’’ and inserting23

‘‘302(c)’’;24

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H.L.C.

(9) in section 4243(f)(2) (29 U.S.C.1

1423(f)(2)), by striking ‘‘303(c)’’ and inserting2

‘‘302(c)(3)’’; and3

(10) in section 4243(g) (29 U.S.C. 1423(g)), by4

striking ‘‘302(c)(3)’’ and inserting ‘‘304(c)(3)’’.5

(c) AMENDMENTS TO REORGANIZATION PLAN NO. 46

OF 1978.—Section 106(b)(ii) of Reorganization Plan No.7

4 of 1978 (ratified and affirmed as law by Public Law8

98–532 (98 Stat. 2705)) is amended by striking9

‘‘302(c)(8)’’ and inserting ‘‘302(d)(2)’’, by striking10

‘‘304(a) and (b)(2)(A)’’ and inserting ‘‘304(d)(1), (d)(2),11

and (e)(2)(A)’’, and by striking ‘‘412(c)(8), (e), and12

(f)(2)(A)’’ and inserting ‘‘412(d)(2) and 431(d)(1), (d)(2),13

and (e)(2)(A)’’.14

(d) REPEAL OF EXPIRED AUTHORITY FOR TEM-15

PORARY VARIANCES.—16

(1) IN GENERAL.—Section 207 of such Act (2917

U.S.C. 1057) is repealed.18

(2) CONFORMING AMENDMENT.—The table of19

contents in section 1 of such Act is amended by20

striking the item relating to section 207.21

(e) EFFECTIVE DATE.—The amendments made by22

this section shall apply to plan years beginning after 2006.23

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H.L.C.

Subtitle B—Amendments to1

Internal Revenue Code of 19862

SEC. 111. MINIMUM FUNDING STANDARDS.3

(a) NEW MINIMUM FUNDING STANDARDS.—Section4

412 of the Internal Revenue Code of 1986 (relating to5

minimum funding standards) is amended to read as fol-6

lows:7

‘‘SEC. 412. MINIMUM FUNDING STANDARDS.8

‘‘(a) REQUIREMENT TO MEET MINIMUM FUNDING9

STANDARD.—10

‘‘(1) IN GENERAL.—A plan to which this sec-11

tion applies shall satisfy the minimum funding12

standard applicable to the plan for any plan year.13

‘‘(2) MINIMUM FUNDING STANDARD.—For pur-14

poses of paragraph (1), a plan shall be treated as15

satisfying the minimum funding standard for a plan16

year if—17


which is not a multiemployer plan, the employer19


the plan year which, in the aggregate, are not21

less than the minimum required contribution22

determined under section 430 for the plan for23

the plan year,24

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H.L.C.

‘‘(B) in the case of a money purchase plan1

which is not a multiemployer plan, the employer2


the plan year which are required under the4

terms of the plan, and5

‘‘(C) in the case of a multiemployer plan,6

the employers make contributions to or under7

the plan for any plan year which, in the aggre-8

gate, are sufficient to ensure that the plan does9

not have an accumulated funding deficiency10

under section 431 as of the end of the plan11

year.12

‘‘(b) LIABILITY FOR CONTRIBUTIONS.—13


graph (2), the amount of any contribution required15

by this section (including any required installments16

under paragraphs (3) and (4) of section 430(j))17

shall be paid by the employer responsible for making18

contributions to or under the plan.19

‘‘(2) JOINT AND SEVERAL LIABILITY WHERE20

EMPLOYER MEMBER OF CONTROLLED GROUP.—In21

the case of a defined benefit plan which is not a22

multiemployer plan, if the employer referred to in23

paragraph (1) is a member of a controlled group,24

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H.L.C.

each member of such group shall be jointly and sev-1

erally liable for payment of such contributions.2

‘‘(c) VARIANCE FROM MINIMUM FUNDING STAND-3

ARDS.—4

‘‘(1) WAIVER IN CASE OF BUSINESS HARD-5

SHIP.—6

‘‘(A) IN GENERAL.—If—7

‘‘(i) an employer is (or in the case of8

a multiemployer plan, 10 percent or more9

of the number of employers contributing to10

or under the plan is) unable to satisfy the11

minimum funding standard for a plan year12

without temporary substantial business13

hardship (substantial business hardship in14

the case of a multiemployer plan), and15

‘‘(ii) application of the standard would16

be adverse to the interests of plan partici-17

pants in the aggregate,18

the Secretary may, subject to subparagraph19

(C), waive the requirements of subsection (a)20

for such year with respect to all or any portion21

of the minimum funding standard. The Sec-22

retary shall not waive the minimum funding23

standard with respect to a plan for more than24

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H.L.C.

3 of any 15 (5 of any 15 in the case of a multi-1

employer plan) consecutive plan years.2

‘‘(B) EFFECTS OF WAIVER.—If a waiver is3

granted under subparagraph (A) for any plan4

year—5

‘‘(i) in the case of a defined benefit6

plan which is not a multiemployer plan,7

the minimum required contribution under8

section 430 for the plan year shall be re-9

duced by the amount of the waived funding10

deficiency and such amount shall be amor-11

tized as required under section 430(e), and12

‘‘(ii) in the case of a multiemployer13

plan, the funding standard account shall14

be credited under section 431(b)(3)(C)15

with the amount of the waived funding de-16

ficiency and such amount shall be amor-17

tized as required under section18

431(b)(2)(C).19

‘‘(C) WAIVER OF AMORTIZED PORTION20

NOT ALLOWED.—The Secretary may not waive21

under subparagraph (A) any portion of the22

minimum funding standard under subsection23

(a) for a plan year which is attributable to any24

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H.L.C.

waived funding deficiency for any preceding1

plan year.2

‘‘(2) DETERMINATION OF BUSINESS HARD-3

SHIP.—For purposes of this subsection, the factors4

taken into account in determining temporary sub-5

stantial business hardship (substantial business6

hardship in the case of a multiemployer plan) shall7

include (but shall not be limited to) whether or8

not—9

‘‘(A) the employer is operating at an eco-10

nomic loss,11

‘‘(B) there is substantial unemployment or12

underemployment in the trade or business and13

in the industry concerned,14

‘‘(C) the sales and profits of the industry15

concerned are depressed or declining, and16

‘‘(D) it is reasonable to expect that the17

plan will be continued only if the waiver is18

granted.19

‘‘(3) WAIVED FUNDING DEFICIENCY.—For pur-20

poses of this section and part III of this subchapter,21

the term ‘waived funding deficiency’ means the por-22

tion of the minimum funding standard under sub-23

section (a) (determined without regard to the waiv-24

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H.L.C.

er) for a plan year waived by the Secretary and not1

satisfied by employer contributions.2

‘‘(4) SECURITY FOR WAIVERS FOR SINGLE-EM-3

PLOYER PLANS, CONSULTATIONS.—4

‘‘(A) SECURITY MAY BE REQUIRED.—5

‘‘(i) IN GENERAL.—Except as pro-6

vided in subparagraph (C), the Secretary7

may require an employer maintaining a de-8

fined benefit plan which is a single-em-9

ployer plan (within the meaning of section10

4001(a)(15) of the Employee Retirement11

Income Security Act of 1974) to provide12

security to such plan as a condition for13

granting or modifying a waiver under14

paragraph (1).15

‘‘(ii) SPECIAL RULES.—Any security16

provided under clause (i) may be perfected17

and enforced only by the Pension Benefit18

Guaranty Corporation, or at the direction19

of the Corporation, by a contributing spon-20

sor (within the meaning of section21

4001(a)(13) of the Employee Retirement22

Income Security Act of 1974), or a mem-23

ber of such sponsor’s controlled group24

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H.L.C.

(within the meaning of section 4001(a)(14)1

of such Act).2

‘‘(B) CONSULTATION WITH THE PENSION3

BENEFIT GUARANTY CORPORATION.—Except as4

provided in subparagraph (C), the Secretary5

shall, before granting or modifying a waiver6

under this subsection with respect to a plan de-7

scribed in subparagraph (A)(i)—8

‘‘(i) provide the Pension Benefit9

Guaranty Corporation with—10

‘‘(I) notice of the completed ap-11

plication for any waiver or modifica-12

tion, and13

‘‘(II) an opportunity to comment14

on such application within 30 days15

after receipt of such notice, and16

‘‘(ii) consider—17

‘‘(I) any comments of the Cor-18

poration under clause (i)(II), and19

‘‘(II) any views of any employee20

organization (within the meaning of21

section 3(4) of the Employee Retire-22

ment Income Security Act of 1974)23

representing participants in the plan24

which are submitted in writing to the25

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H.L.C.

Secretary in connection with such ap-1

plication.2

Information provided to the Corporation under3

this subparagraph shall be considered tax re-4

turn information and subject to the safe-5

guarding and reporting requirements of section6

6103(p).7

‘‘(C) EXCEPTION FOR CERTAIN WAIV-8

ERS.—9

‘‘(i) IN GENERAL.—The preceding10

provisions of this paragraph shall not11

apply to any plan with respect to which the12

sum of—13

‘‘(I) the aggregate unpaid min-14

imum required contribution (within15

the meaning of section 4971(c)(4)) for16

the plan year and all preceding plan17

years, and18

‘‘(II) the present value of all19

waiver amortization installments de-20

termined for the plan year and suc-21

ceeding plan years under section22

430(e)(2),23

is less than $1,000,000.24

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H.L.C.

‘‘(ii) TREATMENT OF WAIVERS FOR1

WHICH APPLICATIONS ARE PENDING.—The2

amount described in clause (i)(I) shall in-3

clude any increase in such amount which4

would result if all applications for waivers5

of the minimum funding standard under6

this subsection which are pending with re-7

spect to such plan were denied.8

‘‘(5) SPECIAL RULES FOR SINGLE-EMPLOYER9

PLANS.—10

‘‘(A) APPLICATION MUST BE SUBMITTED11

BEFORE DATE 21⁄2 MONTHS AFTER CLOSE OF12

YEAR.—In the case of a defined benefit plan13

which is not a multiemployer plan, no waiver14

may be granted under this subsection with re-15

spect to any plan for any plan year unless an16

application therefor is submitted to the Sec-17

retary not later than the 15th day of the 3rd18

month beginning after the close of such plan19

year.20

‘‘(B) SPECIAL RULE IF EMPLOYER IS MEM-21

BER OF CONTROLLED GROUP.—In the case of a22

defined benefit plan which is not a multiem-23

ployer plan, if an employer is a member of a24

controlled group, the temporary substantial25

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H.L.C.

business hardship requirements of paragraph1

(1) shall be treated as met only if such require-2

ments are met—3

‘‘(i) with respect to such employer,4

and5

‘‘(ii) with respect to the controlled6

group of which such employer is a member7

(determined by treating all members of8

such group as a single employer).9

The Secretary may provide that an analysis of10

a trade or business or industry of a member11

need not be conducted if the Secretary deter-12

mines such analysis is not necessary because13

the taking into account of such member would14

not significantly affect the determination under15

this paragraph.16


‘‘(A) IN GENERAL.—The Secretary shall,18

before granting a waiver under this subsection,19

require each applicant to provide evidence satis-20

factory to the Secretary that the applicant has21

provided notice of the filing of the application22

for such waiver to to each affected party (as de-23

fined in section 4001(a)(21) of the Employee24

Retirement Income Security Act of 1974). Such25

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98

H.L.C.

notice shall include a description of the extent1

to which the plan is funded for benefits which2

are guaranteed under title IV of the Employee3

Retirement Income Security Act of 1974 and4

for benefit liabilities.5


FORMATION.—The Secretary shall consider any7

relevant information provided by a person to8

whom notice was given under subparagraph9

(A).10

‘‘(7) RESTRICTION ON PLAN AMENDMENTS.—11

‘‘(A) IN GENERAL.—No amendment of a12

plan which increases the liabilities of the plan13

by reason of any increase in benefits, any14

change in the accrual of benefits, or any change15

in the rate at which benefits become nonforfeit-16

able under the plan shall be adopted if a waiver17

under this subsection or an extension of time18

under section 431(d) is in effect with respect to19

the plan, or if a plan amendment described in20

subsection (d)(2) has been made at any time in21

the preceding 12 months (24 months in the22

case of a multiemployer plan). If a plan is23

amended in violation of the preceding sentence,24

any such waiver, or extension of time, shall not25

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99

H.L.C.

apply to any plan year ending on or after the1

date on which such amendment is adopted.2

‘‘(B) EXCEPTION.—Paragraph (1) shall3

not apply to any plan amendment which—4

‘‘(i) the Secretary determines to be5

reasonable and which provides for only de6

minimis increases in the liabilities of the7

plan,8

‘‘(ii) only repeals an amendment de-9

scribed in subsection (d)(2), or10

‘‘(iii) is required as a condition of11

qualification under part I of subchapter D,12

of chapter 1.13

‘‘(d) MISCELLANEOUS RULES.—14

‘‘(1) CHANGE IN METHOD OR YEAR.—If the15

funding method, the valuation date, or a plan year16

for a plan is changed, the change shall take effect17

only if approved by the Secretary.18

‘‘(2) CERTAIN RETROACTIVE PLAN AMEND-19

MENTS.—For purposes of this section, any amend-20

ment applying to a plan year which—21

‘‘(A) is adopted after the close of such plan22

year but no later than 21⁄2 months after the23

close of the plan year (or, in the case of a mul-24

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100

H.L.C.

tiemployer plan, no later than 2 years after the1

close of such plan year),2

‘‘(B) does not reduce the accrued benefit3

of any participant determined as of the begin-4

ning of the first plan year to which the amend-5

ment applies, and6

‘‘(C) does not reduce the accrued benefit of7

any participant determined as of the time of8

adoption except to the extent required by the9

circumstances,10

shall, at the election of the plan administrator, be11

deemed to have been made on the first day of such12

plan year. No amendment described in this para-13

graph which reduces the accrued benefits of any par-14

ticipant shall take effect unless the plan adminis-15

trator files a notice with the Secretary notifying him16

of such amendment and the Secretary has approved17

such amendment, or within 90 days after the date18

on which such notice was filed, failed to disapprove19

such amendment. No amendment described in this20

subsection shall be approved by the Secretary unless21

the Secretary determines that such amendment is22

necessary because of a substantial business hardship23

(as determined under subsection (c)(2)) and that a24

waiver under subsection (c) (or, in the case of a25

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101

H.L.C.

multiemployer plan, any extension of the amortiza-1

tion period under section 431(d)) is unavailable or2

inadequate.3

‘‘(3) CONTROLLED GROUP.—For purposes of4

this section, the term ‘controlled group’ means any5

group treated as a single employer under subsection6

(b), (c), (m), or (o) of section 414.7

‘‘(e) PLANS TO WHICH SECTION APPLIES.—8


graph (2), this section applies to a plan if, for any10

plan year beginning after December 31, 2006—11

‘‘(A) such plan included a trust which12

qualified (or was determined by the Secretary13

to have qualified) under section 401(a), or14

‘‘(B) such plan satisfied (or was deter-15

mined by the Secretary to have satisfied) the16

requirements of section 403(a).17

‘‘(2) EXCEPTIONS.—This section shall not18

apply to—19

‘‘(A) any profit-sharing or stock bonus20

plan,21

‘‘(B) any insurance contract plan described22

in paragraph (3),23

‘‘(C) any governmental plan (within the24

meaning of section 414(d)),25

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102

H.L.C.

‘‘(D) any church plan (within the meaning1

of section 414(e)) with respect to which the2

election provided by section 410(d) has not been3

made,4

‘‘(E) any plan which has not, at any time5

after September 2, 1974, provided for employer6

contributions, or7

‘‘(F) any plan established and maintained8

by a society, order, or association described in9

section 501(c)(8) or (9), if no part of the con-10

tributions to or under such plan are made by11

employers of participants in such plan.12

No plan described in subparagraph (C), (D), or (F)13

shall be treated as a qualified plan for purposes of14

section 401(a) unless such plan meets the require-15

ments of section 401(a)(7) as in effect on September16

1, 1974.17

‘‘(3) CERTAIN INSURANCE CONTRACT PLANS.—18

A plan is described in this paragraph if—19

‘‘(A) the plan is funded exclusively by the20

purchase of individual insurance contracts,21

‘‘(B) such contracts provide for level an-22

nual premium payments to be paid extending23

not later than the retirement age for each indi-24

vidual participating in the plan, and com-25

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103

H.L.C.

mencing with the date the individual became a1

participant in the plan (or, in the case of an in-2

crease in benefits, commencing at the time such3

increase becomes effective),4

‘‘(C) benefits provided by the plan are5

equal to the benefits provided under each con-6

tract at normal retirement age under the plan7

and are guaranteed by an insurance carrier (li-8

censed under the laws of a State to do business9

with the plan) to the extent premiums have10

been paid,11

‘‘(D) premiums payable for the plan year,12

and all prior plan years, under such contracts13

have been paid before lapse or there is rein-14

statement of the policy,15

‘‘(E) no rights under such contracts have16

been subject to a security interest at any time17

during the plan year, and18

‘‘(F) no policy loans are outstanding at19

any time during the plan year.20

A plan funded exclusively by the purchase of group21

insurance contracts which is determined under regu-22

lations prescribed by the Secretary to have the same23

characteristics as contracts described in the pre-24

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104

H.L.C.

ceding sentence shall be treated as a plan described1

in this paragraph.’’.2

(b) EFFECTIVE DATE.—The amendments made by3

this section shall apply to plan years beginning after De-4

cember 31, 2006.5

SEC. 112. FUNDING RULES FOR SINGLE-EMPLOYER DE-6

FINED BENEFIT PENSION PLANS.7

(a) IN GENERAL.—Subchapter D of chapter 1 of the8

Internal Revenue Code of 1986 (relating to deferred com-9

pensation, etc.) is amended by adding at the end the fol-10

lowing new part:11

‘‘PART III—MINIMUM FUNDING STANDARDS FOR12

SINGLE-EMPLOYER DEFINED BENEFIT PEN-13

SION PLANS14

‘‘SEC. 430. MINIMUM FUNDING STANDARDS FOR SINGLE-15

EMPLOYER DEFINED BENEFIT PENSION16

PLANS.17

‘‘(a) MINIMUM REQUIRED CONTRIBUTION.—For18

purposes of this section and section 412(a)(2)(A), except19

as provided in subsection (f), the term ‘minimum required20

contribution’ means, with respect to any plan year of a21

defined benefit plan which is not a multiemployer plan—22



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105

H.L.C.

(f)(4)(B)) is less than the funding target of the plan1

for the plan year, the sum of—2

‘‘(A) the target normal cost of the plan for3

the plan year,4

‘‘(B) the shortfall amortization charge (if5

any) for the plan for the plan year determined6

under subsection (c), and7

‘‘(C) the waiver amortization charge (if8

any) for the plan for the plan year as deter-9

mined under subsection (e);10



(f)(4)(B)) exceeds the funding target of the plan for13

the plan year, the target normal cost of the plan for14

the plan year reduced by such excess; or15

‘‘(3) in any other case, the target normal cost16

of the plan for the plan year.17

‘‘(b) TARGET NORMAL COST.—For purposes of this18

section, except as provided in subsection (i)(2) with re-19

spect to plans in at-risk status, the term ‘target normal20

cost’ means, for any plan year, the present value of all21

benefits which are expected to accrue or to be earned22

under the plan during the plan year. For purposes of this23

subsection, if any benefit attributable to services per-24

formed in a preceding plan year is increased by reason25

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106

H.L.C.

of any increase in compensation during the current plan1

year, the increase in such benefit shall be treated as hav-2

ing accrued during the current plan year.3

‘‘(c) SHORTFALL AMORTIZATION CHARGE.—4


tion, the shortfall amortization charge for a plan for6

any plan year is the aggregate total of the shortfall7

amortization installments for such plan year with re-8

spect to the shortfall amortization bases for such9

plan year and each of the 6 preceding plan years.10

‘‘(2) SHORTFALL AMORTIZATION INSTALL-11

MENT.—The plan sponsor shall determine, with re-12

spect to the shortfall amortization base of the plan13

for any plan year, the amounts necessary to amor-14

tize such shortfall amortization base, in level annual15

installments over a period of 7 plan years beginning16

with such plan year. For purposes of paragraph (1),17

the annual installment of such amortization for each18

plan year in such 7-plan-year period is the shortfall19

amortization installment for such plan year with re-20

spect to such shortfall amortization base. In deter-21

mining any shortfall amortization installment under22

this paragraph, the plan sponsor shall use the seg-23

ment rates determined under subparagraph (C) of24

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107

H.L.C.

subsection (h)(2), applied under rules similar to the1

rules of subparagraph (B) of subsection (h)(2).2

‘‘(3) SHORTFALL AMORTIZATION BASE.—For3

purposes of this section, the shortfall amortization4

base of a plan for a plan year is the excess (if any)5

of—6

‘‘(A) the funding shortfall of such plan for7

such plan year, over8

‘‘(B) the sum of—9

‘‘(i) the present value (determined10

using the segment rates determined under11

subparagraph (C) of subsection (h)(2), ap-12

plied under rules similar to the rules of13

subparagraph (B) of subsection (h)(2)) of14

the aggregate total of the shortfall amorti-15

zation installments, for such plan year and16

the 5 succeeding plan years, which have17

been determined with respect to the short-18

fall amortization bases of the plan for each19

of the 6 plan years preceding such plan20

year, and21

‘‘(ii) the present value (as so deter-22

mined) of the aggregate total of the waiver23

amortization installments for such plan24

year and the 5 succeeding plan years,25

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108

H.L.C.

which have been determined with respect1

to the waiver amortization bases of the2

plan for each of the 5 plan years preceding3

such plan year.4

‘‘(4) FUNDING SHORTFALL.—For purposes of5

this section, the funding shortfall of a plan for any6

plan year is the excess (if any) of—7

‘‘(A) the funding target of the plan for the8

plan year, over9

‘‘(B) the value of plan assets of the plan10

(as reduced under subsection (f)(4)(B)) for the11

plan year which are held by the plan on the12

valuation date.13

‘‘(5) EXEMPTION FROM NEW SHORTFALL AM-14

ORTIZATION BASE.—15


the value of plan assets of the plan (as reduced17

under subsection (f)(4)(A)) is equal to or great-18

er than the funding target of the plan for the19

plan year, the shortfall amortization base of the20

plan for such plan year shall be zero.21

‘‘(B) TRANSITION RULE.—22


non-deficit reduction plan, subparagraph24

(A) shall be applied to plan years begin-25

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H.L.C.

ning after 2006 and before 2011 by sub-1

stituting, for the funding target of the plan2

for the plan year, the applicable percentage3

of such funding target determined under4

the following table:5




‘‘(ii) LIMITATION.—Clause (i) shall6


after 2007 unless the ratio (expressed as a8


‘‘(I) the value of plan assets for10

each preceding plan year after 200611

(as reduced under subsection12

(f)(4)(A)), bears to13

‘‘(II) the funding target of the14

plan for such preceding plan year (de-15

termined without regard to subsection16

(i)(1)),17

is not less than the applicable percentage18

with respect to such preceding plan deter-19

mined under clause (i).20

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H.L.C.

‘‘(iii) NON-DEFICIT REDUCTION1

PLAN.—For purposes of clause (i), the2

term ‘non-deficit reduction plan’ means3

any plan—4

‘‘(I) to which this part (as in ef-5

fect on the day before the date of the6

enactment of the Pension Protection7

Act of 2005) applied for the plan year8


‘‘(II) to which section 412(d) (as10

so in effect) did not apply for such11

plan year.12




is zero, for purposes of determining the shortfall am-16


plan years, the shortfall amortization bases for all18

preceding plan years (and all shortfall amortization19

installments determined with respect to such bases)20

shall be reduced to zero.21

‘‘(d) RULES RELATING TO FUNDING TARGET.—For22

purposes of this section—23

‘‘(1) FUNDING TARGET.—Except as provided in24

subsection (i)(1) with respect to plans in at-risk sta-25

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H.L.C.

tus, the funding target of a plan for a plan year is1

the present value of all liabilities to participants and2

their beneficiaries under the plan for the plan year.3


AGE.—The ‘funding target attainment percentage’ of5

a plan for a plan year is the ratio (expressed as a6



year (as reduced under subsection (f)(4)(B)),9

bears to10


plan year (determined without regard to sub-12

section (i)(1)).13

‘‘(e) WAIVER AMORTIZATION CHARGE.—14

‘‘(1) DETERMINATION OF WAIVER AMORTIZA-15

TION CHARGE.—The waiver amortization charge (if16

any) for a plan for any plan year is the aggregate17

total of the waiver amortization installments for18

such plan year with respect to the waiver amortiza-19

tion bases for each of the 5 preceding plan years.20

‘‘(2) WAIVER AMORTIZATION INSTALLMENT.—21

The plan sponsor shall determine, with respect to22

the waiver amortization base of the plan for any23

plan year, the amounts necessary to amortize such24

waiver amortization base, in level annual install-25

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112

H.L.C.

ments over a period of 5 plan years beginning with1

the succeeding plan year. For purposes of paragraph2

(1), the annual installment of such amortization for3

each plan year in such 5-plan year period is the4

waiver amortization installment for such plan year5

with respect to such waiver amortization base.6

‘‘(3) INTEREST RATE.—In determining any7

waiver amortization installment under this sub-8

section, the plan sponsor shall use the segment rates9

determined under subparagraph (C) of subsection10

(h)(2), applied under rules similar to the rules of11

subparagraph (B) of subsection (h)(2).12

‘‘(4) WAIVER AMORTIZATION BASE.—The waiv-13

er amortization base of a plan for a plan year is the14

amount of the waived funding deficiency (if any) for15

such plan year under section 412(c).16




is zero, for purposes of determining the waiver am-20


plan years, the waiver amortization base for all pre-22

ceding plan years shall be reduced to zero.23

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H.L.C.

‘‘(f) REDUCTION OF MINIMUM REQUIRED CONTRIBU-1

TION BY PRE-FUNDING BALANCE AND FUNDING STAND-2

ARD CARRYOVER BALANCE.—3

‘‘(1) ELECTION TO MAINTAIN BALANCES.—4

‘‘(A) PRE-FUNDING BALANCE.—The plan5

sponsor of a defined benefit plan which is not6

a multiemployer plan may elect to maintain a7

pre-funding balance.8

‘‘(B) FUNDING STANDARD CARRYOVER9

BALANCE.—10


defined benefit plan (other than a multiem-12

ployer plan) described in clause (ii), the13

plan sponsor may elect to maintain a fund-14

ing standard carryover balance, until such15

balance is reduced to zero.16

‘‘(ii) PLANS MAINTAINING FUNDING17

STANDARD ACCOUNT IN 2006.—A plan is18

described in this clause if the plan—19

‘‘(I) was in effect for a plan year20


‘‘(II) had a positive balance in22

the funding standard account under23

section 412(b) as in effect for such24

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H.L.C.

plan year and determined as of the1

end of such plan year.2

‘‘(2) APPLICATION OF BALANCES.—A pre-fund-3

ing balance and a funding standard carryover bal-4

ance maintained pursuant to this paragraph—5

‘‘(A) shall be available for crediting against6

the minimum required contribution, pursuant to7

an election under paragraph (3),8

‘‘(B) shall be applied as a reduction in the9

amount treated as the value of plan assets for10

purposes of this section, to the extent provided11

in paragraph (4), and12

‘‘(C) may be reduced at any time, pursu-13

ant to an election under paragraph (5).14

‘‘(3) ELECTION TO APPLY BALANCES AGAINST15

MINIMUM REQUIRED CONTRIBUTION.—16


subparagraphs (B) and (C), in the case of any18

plan year in which the plan sponsor elects to19

credit against the minimum required contribu-20

tion for the current plan year all or a portion21

of the pre-funding balance or the funding22

standard carryover balance for the current plan23

year (not in excess of such minimum required24

contribution), the minimum required contribu-25

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115

H.L.C.

tion for the plan year shall be reduced by the1

amount so credited by the plan sponsor. For2

purposes of the preceding sentence, the min-3

imum required contribution shall be determined4

after taking into account any waiver under sec-5

tion 412(c).6

‘‘(B) COORDINATION WITH FUNDING7

STANDARD CARRYOVER BALANCE.—To the ex-8

tent that any plan has a funding standard car-9

ryover balance greater than zero, no amount of10

the pre-funding balance of such plan may be11

credited under this paragraph in reducing the12

minimum required contribution.13

‘‘(C) LIMITATION FOR UNDERFUNDED14

PLANS.—The preceding provisions of this para-15

graph shall not apply for any plan year if the16

ratio (expressed as a percentage) which—17


preceding plan year (as reduced under19

paragraph (4)(C)), bears to20


the preceding plan year (determined with-22

out regard to subsection (i)(1)),23

is less than 80 percent.24

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H.L.C.

‘‘(4) EFFECT OF BALANCES ON AMOUNTS1

TREATED AS VALUE OF PLAN ASSETS.—In the case2

of any plan maintaining a pre-funding balance or a3

funding standard carryover balance pursuant to this4

subsection, the amount treated as the value of plan5

assets shall be deemed to be such amount, reduced6

as provided in the following subparagraphs:7

‘‘(A) APPLICABILITY OF SHORTFALL AM-8

ORTIZATION BASE.—For purposes of subsection9

(c)(5), the value of plan assets is deemed to be10

such amount, reduced by the amount of the11

pre-funding balance, but only if an election12

under paragraph (2) applying any portion of13

the pre-funding balance in reducing the min-14

imum required contribution is in effect for the15

plan year.16

‘‘(B) DETERMINATION OF EXCESS ASSETS,17

FUNDING SHORTFALL, AND FUNDING TARGET18

ATTAINMENT PERCENTAGE.—19

‘‘(i) IN GENERAL.—For purposes of20

subsections (a), (c)(4)(B), and (d)(2)(A),21

the value of plan assets is deemed to be22

such amount, reduced by the amount of23


standard carryover balance.25

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H.L.C.

‘‘(ii) SPECIAL RULE FOR CERTAIN1

BINDING AGREEMENTS WITH PBGC.—For2

purposes of subsection (c)(4)(B), the value3

of plan assets shall not be deemed to be re-4

duced for a plan year by the amount of the5

specified balance if, with respect to such6

balance, there is in effect for a plan year7

a binding written agreement with the Pen-8

sion Benefit Guaranty Corporation which9

provides that such balance is not available10

to reduce the minimum required contribu-11

tion for the plan year. For purposes of the12

preceding sentence, the term ‘specified bal-13

ance’ means the pre-funding balance or the14

funding standard carryover balance, as the15

case may be.16

‘‘(C) AVAILABILITY OF BALANCES IN PLAN17

YEAR FOR CREDITING AGAINST MINIMUM RE-18

QUIRED CONTRIBUTION.—For purposes of19

paragraph (3)(C)(i) of this subsection, the value20

of plan assets is deemed to be such amount, re-21

duced by the amount of the pre-funding bal-22

ance.23

‘‘(5) ELECTION TO REDUCE BALANCE PRIOR TO24

DETERMINATIONS OF VALUE OF PLAN ASSETS AND25

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H.L.C.

CREDITING AGAINST MINIMUM REQUIRED CONTRIBU-1

TION.—2

‘‘(A) IN GENERAL.—The plan sponsor may3

elect to reduce by any amount the balance of4


ard carryover balance for any plan year (but6

not below zero). Such reduction shall be effec-7

tive prior to any determination of the value of8

plan assets for such plan year under this sec-9

tion and application of the balance in reducing10

the minimum required contribution for such11

plan for such plan year pursuant to an election12

under paragraph (2).13

‘‘(B) COORDINATION BETWEEN PRE-FUND-14

ING BALANCE AND FUNDING STANDARD CARRY-15

OVER BALANCE.—To the extent that any plan16

has a funding standard carryover balance great-17

er than zero, no election may be made under18

subparagraph (A) with respect to the pre-fund-19

ing balance.20

‘‘(6) PRE-FUNDING BALANCE.—21

‘‘(A) IN GENERAL.—A pre-funding balance22

maintained by a plan shall consist of a begin-23

ning balance of zero, increased and decreased to24

the extent provided in subparagraphs (B) and25

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119

H.L.C.

(C), and adjusted further as provided in para-1

graph (8).2

‘‘(B) INCREASES.—As of the valuation3

date for each plan year beginning after 2007,4

the pre-funding balance of a plan shall be in-5

creased by the amount elected by the plan spon-6

sor for the plan year. Such amount shall not ex-7

ceed the excess (if any) of—8

‘‘(i) the aggregate total of employer9

contributions to the plan for the preceding10

plan year, over11

‘‘(ii) the minimum required contribu-12

tion for such preceding plan year (in-13

creased by interest on any portion of such14

minimum required contribution remaining15

unpaid as of the valuation date for the cur-16

rent plan year, at the effective interest rate17

for the plan for the preceding plan year,18

for the period beginning with the first day19

of such preceding plan year and ending on20

the date that payment of such portion is21

made).22


date for each plan year after 2007, the pre-24

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120

H.L.C.

funding balance of a plan shall be decreased1

(but not below zero) by the sum of—2







‘‘(7) FUNDING STANDARD CARRYOVER BAL-9

ANCE.—10

‘‘(A) IN GENERAL.—A funding standard11

carryover balance maintained by a plan shall12

consist of a beginning balance determined13

under subparagraph (B), decreased to the ex-14

tent provided in subparagraph (C), and ad-15

justed further as provided in paragraph (8).16

‘‘(B) BEGINNING BALANCE.—The begin-17

ning balance of the funding standard carryover18

balance shall be the positive balance described19

in paragraph (1)(B)(ii)(II).20


date for each plan year after 2007, the funding22

standard carryover balance of a plan shall be23

decreased (but not below zero) by the sum of—24

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121

H.L.C.







‘‘(8) ADJUSTMENTS TO BALANCES.—In deter-7

mining the pre-funding balance or the funding8

standard carryover balance of a plan as of the valu-9

ation date (before applying any increase or decrease10

under paragraph (6) or (7)), the plan sponsor shall,11

in accordance with regulations which shall be pre-12

scribed by the Secretary, adjust such balance so as13

to reflect the rate of net gain or loss (determined,14

notwithstanding subsection (g)(3), on the basis of15

fair market value) experienced by all plan assets for16

the period beginning with the valuation date for the17

preceding plan year and ending with the date pre-18

ceding the valuation date for the current plan year,19

properly taking into account, in accordance with20

such regulations, all contributions, distributions, and21

other plan payments made during such period.22

‘‘(9) ELECTIONS.—Elections under this sub-23

section shall be made at such times, and in such24

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122

H.L.C.

form and manner, as shall be prescribed in regula-1

tions of the Secretary.2

‘‘(g) VALUATION OF PLAN ASSETS AND LIABIL-3

ITIES.—4

‘‘(1) TIMING OF DETERMINATIONS.—Except as5

otherwise provided under this subsection, all deter-6

minations under this section for a plan year shall be7

made as of the valuation date of the plan for such8

plan year.9

‘‘(2) VALUATION DATE.—For purposes of this10

section—11


subparagraph (B), the valuation date of a plan13

for any plan year shall be the first day of the14

plan year.15

‘‘(B) EXCEPTION FOR SMALL PLANS.—If,16

on each day during the preceding plan year, a17

plan had 500 or fewer participants, the plan18

may designate any day during the plan year as19

its valuation date for such plan year and suc-20

ceeding plan years. For purposes of this sub-21

paragraph, all defined benefit plans (other than22

multiemployer plans) maintained by the same23

employer (or any member of such employer’s24

controlled group) shall be treated as 1 plan, but25

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123

H.L.C.

only participants with respect to such employer1

or member shall be taken into account.2

‘‘(C) APPLICATION OF CERTAIN RULES IN3

DETERMINATION OF PLAN SIZE.—For purposes4


‘‘(i) PLANS NOT IN EXISTENCE IN6

PRECEDING YEAR.—In the case of the first7

plan year of any plan, subparagraph (B)8

shall apply to such plan by taking into ac-9

count the number of participants that the10

plan is reasonably expected to have on11

days during such first plan year.12

‘‘(ii) PREDECESSORS.—Any reference13

in subparagraph (B) to an employer shall14

include a reference to any predecessor of15

such employer.16

‘‘(3) AUTHORIZATION OF USE OF ACTUARIAL17

VALUE.—For purposes of this section, the value of18

plan assets shall be determined on the basis of any19

reasonable actuarial method of valuation which takes20

into account fair market value and which is per-21

mitted under regulations prescribed by the Sec-22

retary, except that—23

‘‘(A) any such method providing for aver-24

aging of fair market values may not provide for25

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124

H.L.C.

averaging of such values over more than the 36-1

month period ending with the month which in-2

cludes the valuation date, and3

‘‘(B) any such method may not result in a4

determination of the value of plan assets which,5

at any time, is lower than 90 percent or greater6

than 110 percent of the fair market value of7

such assets at such time.8

‘‘(4) ACCOUNTING FOR CONTRIBUTION RE-9

CEIPTS.—For purposes of this section—10

‘‘(A) CONTRIBUTIONS FOR PRIOR PLAN11

YEARS TAKEN INTO ACCOUNT.—For purposes12

of determining the value of plan assets for any13

current plan year, in any case in which a con-14

tribution properly allocable to amounts owed for15

a preceding plan year is made on or after the16

valuation date of the plan for such current plan17

year, such contribution shall be taken into ac-18

count, except that any such contribution made19

during any such current plan year beginning20

after 2007 shall be taken into account only in21

an amount equal to its present value (deter-22

mined using the effective rate of interest for the23

plan for the preceding plan year) as of the valu-24

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125

H.L.C.

ation date of the plan for such current plan1

year.2

‘‘(B) CONTRIBUTIONS FOR CURRENT PLAN3

YEAR DISREGARDED.—For purposes of deter-4

mining the value of plan assets for any current5

plan year, contributions which are properly allo-6

cable to amounts owed for such plan year shall7

not be taken into account, and, in the case of8

any such contribution made before the valuation9

date of the plan for such plan year, such value10

of plan assets shall be reduced for interest on11

such amount determined using the effective rate12

of interest of the plan for the current plan year13

for the period beginning when such payment14

was made and ending on the valuation date of15

the plan.16

‘‘(5) ACCOUNTING FOR PLAN LIABILITIES.—17


‘‘(A) LIABILITIES TAKEN INTO ACCOUNT19

FOR CURRENT PLAN YEAR.—In determining the20

value of liabilities under a plan for a plan year,21

liabilities shall be taken into account to the ex-22

tent attributable to benefits (including any early23

retirement or similar benefit) accrued or earned24

as of the beginning of the plan year.25

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H.L.C.

‘‘(B) ACCRUALS DURING CURRENT PLAN1

YEAR DISREGARDED.—For purposes of sub-2

paragraph (A), benefits accrued or earned dur-3

ing such plan year shall not be taken into ac-4

count, irrespective of whether the valuation date5

of the plan for such plan year is later than the6

first day of such plan year.7

‘‘(h) ACTUARIAL ASSUMPTIONS AND METHODS.—8

‘‘(1) IN GENERAL.—Subject to this subsection,9

the determination of any present value or other com-10

putation under this section shall be made on the11

basis of actuarial assumptions and methods—12






under the plan.18

‘‘(2) INTEREST RATES.—19

‘‘(A) EFFECTIVE INTEREST RATE.—For20

purposes of this section, the term ‘effective in-21

terest rate’ means, with respect to any plan for22

any plan year, the single rate of interest which,23

if used to determine the present value of the24

plan’s liabilities referred to in subsection (d)(1),25

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127

H.L.C.

would result in an amount equal to the funding1

target of the plan for such plan year.2

‘‘(B) INTEREST RATES FOR DETERMINING3

FUNDING TARGET.—For purposes of deter-4

mining the funding target of a plan for any5

plan year, the interest rate used in determining6

the present value of the liabilities of the plan7

shall be—8

‘‘(i) in the case of liabilities reason-9


5-year period beginning on the first day of11

the plan year, the first segment rate with12

respect to the applicable month,13

‘‘(ii) in the case of liabilities reason-14


15-year period beginning at the end of the16

period described in clause (i), the second17

segment rate with respect to the applicable18

month, and19

‘‘(iii) in the case of liabilities reason-20

ably determined to be payable after the pe-21

riod described in clause (ii), the third seg-22

ment rate with respect to the applicable23

month.24

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H.L.C.

‘‘(C) SEGMENT RATES.—For purposes of1

this paragraph—2

‘‘(i) FIRST SEGMENT RATE.—The3

term ‘first segment rate’ means, with re-4



Secretary for such month on the basis of7

the corporate bond yield curve for such8

month, taking into account only that por-9

tion of such yield curve which is based on10

bonds maturing during the 5-year period11

commencing with such month.12

‘‘(ii) SECOND SEGMENT RATE.—The13

term ‘second segment rate’ means, with re-14







bonds maturing during the 15-year period21

beginning at the end of the period de-22

scribed in clause (i).23

‘‘(iii) THIRD SEGMENT RATE.—The24

term ‘third segment rate’ means, with re-25

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129

H.L.C.







bonds maturing during periods beginning7

after the period described in clause (ii).8

‘‘(D) CORPORATE BOND YIELD CURVE.—9

For purposes of this paragraph—10

‘‘(i) IN GENERAL.—The term ‘cor-11

porate bond yield curve’ means, with re-12

spect to any month, a yield curve which is13

prescribed by the Secretary for such month14

and which reflects a 3-year weighted aver-15

age of yields on investment grade cor-16

porate bonds with varying maturities.17

‘‘(ii) 3-YEAR WEIGHTED AVERAGE.—18

The term ‘3-year weighted average’ means19

an average determined by using a method-20

ology under which the most recent year is21

weighted 50 percent, the year preceding22

such year is weighted 35 percent, and the23

second year preceding such year is weight-24

ed 15 percent.25

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H.L.C.

‘‘(E) APPLICABLE MONTH.—For purposes1

of this paragraph, the term ‘applicable month’2

means, with respect to any plan for any plan3

year, the month which includes the valuation4

date of such plan for such plan year or, at the5

election of the plan sponsor, any of the 46

months which precede such month. Any election7

made under this subparagraph shall apply to8

the plan year for which the election is made and9

all succeeding plan years, unless the election is10

revoked with the consent of the Secretary.11

‘‘(F) PUBLICATION REQUIREMENTS.—The12

Secretary shall publish for each month the cor-13

porate bond yield curve (and the corporate bond14

yield curve reflecting the modification described15

in section 417(e)(3)(D)(i) for such month and16

each of the rates determined under subpara-17

graph (B) for such month. The Secretary shall18

also publish a description of the methodology19

used to determine such yield curve and such20

rates which is sufficiently detailed to enable21

plans to make reasonable projections regarding22

the yield curve and such rates for future23

months based on the plan’s projection of future24

interest rates.25

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H.L.C.

‘‘(G) TRANSITION RULE.—1

‘‘(i) IN GENERAL.—Notwithstanding2

the preceding provisions of this paragraph,3

for plan years beginning in 2007 or 2008,4

the first, second, or third segment rate for5

a plan with respect to any month shall be6

equal to the sum of—7

‘‘(I) the product of such rate for8

such month determined without re-9

gard to this subparagraph, multiplied10

by the applicable percentage, and11

‘‘(II) the product of the rate de-12

termined under the rules of section13

412(b)(5)(B)(ii)(II) (as in effect for14

plan years beginning in 2006), multi-15

plied by a percentage equal to 10016

percent minus the applicable percent-17

age.18

‘‘(ii) APPLICABLE PERCENTAGE.—For19

purposes of clause (i), the applicable per-20

centage is 331⁄3 percent for plan years be-21

ginning in 2007 and 662⁄3 percent for plan22

years beginning in 2008.23

‘‘(iii) NEW PLANS INELIGIBLE.—24

Clause (i) shall not apply to any plan if the25

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132

H.L.C.

first plan year of the plan begins after De-1

cember 31, 2006.2

‘‘(3) MORTALITY TABLE.—3


subparagraph (B), the mortality table used in5

determining any present value or making any6

computation under this section shall be the7

RP–2000 Combined Mortality Table using8

Scale AA published by the Society of Actuaries9

(as in effect on the date of the enactment of the10

Pension Protection Act of 2005), projected as11

of the plan’s valuation date.12

‘‘(B) SUBSTITUTE MORTALITY TABLE.—13

‘‘(i) IN GENERAL.—Upon request by14

the plan sponsor and approval by the Sec-15

retary for a period not to exceed 10 years,16

a mortality table which meets the require-17

ments of clause (ii) shall be used in deter-18

mining any present value or making any19

computation under this section. A mor-20

tality table described in this clause shall21

cease to be in effect if the plan actuary de-22

termines at any time that such table does23

not meet the requirements of subclauses24

(I) and (II) of clause (ii).25

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133

H.L.C.

‘‘(ii) REQUIREMENTS.—A mortality1

table meets the requirements of this clause2

if the Secretary determines that—3

‘‘(I) such table reflects the actual4

experience of the pension plan and5

projected trends in such experience,6

and7

‘‘(II) such table is significantly8

different from the table described in9

subparagraph (A).10

‘‘(iii) DEADLINE FOR DISPOSITION OF11

APPLICATION.—Any mortality table sub-12

mitted to the Secretary for approval under13

this subparagraph shall be treated as in ef-14

fect for the succeeding plan year unless the15

Secretary, during the 180-day period be-16

ginning on the date of such submission,17

disapproves of such table and provides the18

reasons that such table fails to meet the19

requirements of clause (ii).20

‘‘(C) TRANSITION RULE.—Under regula-21

tions of the Secretary, any difference in present22

value resulting from the difference in the as-23

sumptions as set forth in the mortality table24

specified in subparagraph (A) and the assump-25

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134

H.L.C.

tions as set forth in the mortality table de-1

scribed in section 412(l)(7)(C)(ii) (as in effect2

for plan years beginning in 2006) shall be3

phased in ratably over the first period of 5 plan4

years beginning in or after 2007 so as to be5

fully effective for the fifth plan year. The pre-6

ceding sentence shall not apply to any plan if7

the first plan year of the plan begins after De-8

cember 31, 2006.9

‘‘(4) PROBABILITY OF BENEFIT PAYMENTS IN10

THE FORM OF LUMP SUMS OR OTHER OPTIONAL11

FORMS.—For purposes of determining any present12

value or making any computation under this section,13

there shall be taken into account—14

‘‘(A) the probability that future benefit15

payments under the plan will be made in the16

form of optional forms of benefits provided17

under the plan (including lump sum distribu-18

tions, determined on the basis of the plan’s ex-19

perience and other related assumptions), and20

‘‘(B) any difference in the present value of21

such future benefit payments resulting from the22

use of actuarial assumptions, in determining23

benefit payments in any such optional form of24

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135

H.L.C.

benefits, which are different from those speci-1

fied in this subsection.2

‘‘(5) APPROVAL OF LARGE CHANGES IN ACTU-3

ARIAL ASSUMPTIONS.—4

‘‘(A) IN GENERAL.—No actuarial assump-5

tion used to determine the funding target for a6

plan to which this paragraph applies may be7

changed without the approval of the Secretary.8



only if—11

‘‘(i) the plan is a defined benefit plan12

(other than a multiemployer plan) to which13

title IV of the Employee Retirement In-14

come Security Act of 1974 applies,15

‘‘(ii) the aggregate unfunded vested16

benefits as of the close of the preceding17


4006(a)(3)(E)(iii) of the Employee Retire-19

ment Income Security Act of 1974) of such20

plan and all other plans maintained by the21

contributing sponsors (as defined in sec-22

tion 4001(a)(13) of such Act) and mem-23

bers of such sponsors’ controlled groups24

(as defined in section 4001(a)(14) of such25

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136

H.L.C.

Act) which are covered by title IV (dis-1

regarding plans with no unfunded vested2

benefits) exceed $50,000,000, and3

‘‘(iii) the change in assumptions (de-4

termined after taking into account any5

changes in interest rate and mortality6

table) results in a decrease in the funding7

shortfall of the plan for the current plan8

year that exceeds $50,000,000, or that ex-9

ceeds $5,000,000 and that is 5 percent or10

more of the funding target of the plan be-11

fore such change.12

‘‘(i) SPECIAL RULES FOR AT-RISK PLANS.—13

‘‘(1) FUNDING TARGET FOR PLANS IN AT-RISK14

STATUS.—15


a plan is in at-risk status for a plan year, the17

funding target of the plan for the plan year is18

the sum of—19

‘‘(i) the present value of all liabilities20

to participants and their beneficiaries21

under the plan for the plan year, as deter-22

mined by using, in addition to the actu-23

arial assumptions described in subsection24

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137

H.L.C.

(h), the supplemental actuarial assump-1

tions described in subparagraph (B), plus2

‘‘(ii) a loading factor determined3

under subparagraph (C).4

‘‘(B) SUPPLEMENTAL ACTUARIAL ASSUMP-5

TIONS.—The actuarial assumptions used in de-6

termining the valuation of the funding target7

shall include, in addition to the actuarial as-8

sumptions described in subsection (h), an as-9

sumption that all participants will elect benefits10

at such times and in such forms as will result11

in the highest present value of liabilities under12

subparagraph (A)(i).13

‘‘(C) LOADING FACTOR.—The loading fac-14

tor applied with respect to a plan under this15

paragraph for any plan year is the sum of—16

‘‘(i) $700, times the number of par-17

ticipants in the plan, plus18

‘‘(ii) 4 percent of the funding target19

(determined without regard to this para-20

graph) of the plan for the plan year.21

‘‘(2) TARGET NORMAL COST OF AT-RISK22

PLANS.—In any case in which a plan is in at-risk23

status for a plan year, the target normal cost of the24

plan for such plan year shall be the sum of—25

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138

H.L.C.

‘‘(A) the present value of all benefits which1

are expected to accrue or be earned under the2

plan during the plan year, determined under3

the actuarial assumptions used under para-4

graph (1), plus5

‘‘(B) the loading factor under paragraph6

(1)(C), excluding the portion of the loading fac-7

tor described in paragraph (1)(C)(i).8

‘‘(3) DETERMINATION OF AT-RISK STATUS.—9

For purposes of this subsection, a plan is in ‘at-risk10

status’ for a plan year if the funding target attain-11

ment percentage of the plan for the preceding plan12

year was less than 60 percent.13

‘‘(4) TRANSITION BETWEEN APPLICABLE FUND-14

ING TARGETS AND BETWEEN APPLICABLE TARGET15

NORMAL COSTS.—16


a plan which is in at-risk status for a plan year18

has been in such status for a consecutive period19

of fewer than 5 plan years, the applicable20

amount of the funding target and of the target21

normal cost shall be, in lieu of the amount de-22

termined without regard to this paragraph, the23

sum of—24

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139

H.L.C.

‘‘(i) the amount determined under this1

section without regard to this subsection,2

plus3

‘‘(ii) the transition percentage for4

such plan year of the excess of the amount5

determined under this subsection (without6

regard to this paragraph) over the amount7

determined under this section without re-8

gard to this subsection.9

‘‘(B) TRANSITION PERCENTAGE.—For10

purposes of this paragraph, the ‘transition per-11

centage’ for a plan year is the product derived12

by multiplying—13

‘‘(i) 20 percent, by14

‘‘(ii) the number of plan years during15

the period described in subparagraph (A).16

‘‘(j) PAYMENT OF MINIMUM REQUIRED CONTRIBU-17

TIONS.—18


tion, the due date for any payment of any minimum20

required contribution for any plan year shall be 81⁄221

months after the close of the plan year.22

‘‘(2) INTEREST.—Any payment required under23

paragraph (1) for a plan year that is made on a date24

other than the valuation date for such plan year25

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140

H.L.C.

shall be adjusted for interest accruing for the period1

between the valuation date and the payment date, at2

the effective rate of interest for the plan for such3

plan year.4

‘‘(3) ACCELERATED QUARTERLY CONTRIBUTION5

SCHEDULE FOR UNDERFUNDED PLANS.—6

‘‘(A) INTEREST PENALTY FOR FAILURE TO7

MEET ACCELERATED QUARTERLY PAYMENT8

SCHEDULE.—In any case in which the plan has9

a funding shortfall for the preceding plan year,10

if the required installment is not paid in full,11

then the minimum required contribution for the12

plan year (as increased under paragraph (2))13

shall be further increased by an amount equal14

to the interest on the amount of the under-15

payment for the period of the underpayment,16

using an interest rate equal to the excess of—17

‘‘(i) 175 percent of the Federal mid-18

term rate (as in effect under section 127419

for the 1st month of such plan year), over20

‘‘(ii) the effective rate of interest for21


‘‘(B) AMOUNT OF UNDERPAYMENT, PE-23

RIOD OF UNDERPAYMENT.—For purposes of24

subparagraph (A)—25

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141

H.L.C.

‘‘(i) AMOUNT.—The amount of the1

underpayment shall be the excess of—2

‘‘(I) the required installment,3

over4

‘‘(II) the amount (if any) of the5

installment contributed to or under6

the plan on or before the due date for7

the installment.8

‘‘(ii) PERIOD OF UNDERPAYMENT.—9

The period for which any interest is10

charged under this paragraph with respect11

to any portion of the underpayment shall12

run from the due date for the installment13

to the date on which such portion is con-14

tributed to or under the plan.15

‘‘(iii) ORDER OF CREDITING CON-16

TRIBUTIONS.—For purposes of clause17

(i)(II), contributions shall be credited18

against unpaid required installments in the19

order in which such installments are re-20

quired to be paid.21

‘‘(C) NUMBER OF REQUIRED INSTALL-22

MENTS; DUE DATES.—For purposes of this23

paragraph—24

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142

H.L.C.

‘‘(i) PAYABLE IN 4 INSTALLMENTS.—1

There shall be 4 required installments for2

each plan year.3

‘‘(ii) TIME FOR PAYMENT OF IN-4

STALLMENTS.—The due dates for required5

installments are set forth in the following6

table:7

‘‘In the case of the followingrequired installment:

The due date is:

1st ........................................................................... April 15

2nd ......................................................................... July 15

3rd .......................................................................... October 15

4th .......................................................................... January 15 of the fol-

lowing year

‘‘(D) AMOUNT OF REQUIRED INSTALL-8

MENT.—For purposes of this paragraph—9

‘‘(i) IN GENERAL.—The amount of10

any required installment shall be 25 per-11

cent of the required annual payment.12

‘‘(ii) REQUIRED ANNUAL PAYMENT.—13

For purposes of clause (i), the term ‘re-14

quired annual payment’ means the lesser15

of—16

‘‘(I) 90 percent of the minimum17

required contribution (without regard18

to any waiver under section 412(c)) to19

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143

H.L.C.

the plan for the plan year under this1

section, or2

‘‘(II) in the case of a plan year3

beginning after 2007, 100 percent of4

the minimum required contribution5

(without regard to any waiver under6

section 412(c)) to the plan for the7

preceding plan year.8

Subclause (II) shall not apply if the pre-9

ceding plan year referred to in such clause10

was not a year of 12 months.11

‘‘(E) FISCAL YEARS AND SHORT YEARS.—12

‘‘(i) FISCAL YEARS.—In applying this13

paragraph to a plan year beginning on any14

date other than January 1, there shall be15

substituted for the months specified in this16

paragraph, the months which correspond17

thereto.18

‘‘(ii) SHORT PLAN YEAR.—This sub-19

paragraph shall be applied to plan years of20

less than 12 months in accordance with21

regulations prescribed by the Secretary.22

‘‘(4) LIQUIDITY REQUIREMENT IN CONNECTION23

WITH QUARTERLY CONTRIBUTIONS.—24

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144

H.L.C.

‘‘(A) IN GENERAL.—A plan to which this1

paragraph applies shall be treated as failing to2

pay the full amount of any required installment3

under paragraph (3) to the extent that the4

value of the liquid assets paid in such install-5

ment is less than the liquidity shortfall (wheth-6

er or not such liquidity shortfall exceeds the7

amount of such installment required to be paid8

but for this paragraph).9



(other than a plan that would be described in12

subsection (f)(2)(B) if ‘100’ were substituted13

for ‘500’ therein) which—14

‘‘(i) is required to pay installments15

under paragraph (3) for a plan year, and16

‘‘(ii) has a liquidity shortfall for any17

quarter during such plan year.18

‘‘(C) PERIOD OF UNDERPAYMENT.—For19

purposes of paragraph (3)(A), any portion of an20

installment that is treated as not paid under21

subparagraph (A) shall continue to be treated22

as unpaid until the close of the quarter in23

which the due date for such installment occurs.24

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145

H.L.C.

‘‘(D) LIMITATION ON INCREASE.—If the1

amount of any required installment is increased2

by reason of subparagraph (A), in no event3

shall such increase exceed the amount which,4

when added to prior installments for the plan5

year, is necessary to increase the funding target6

attainment percentage of the plan for the plan7

year (taking into account the expected increase8

in funding target due to benefits accruing or9

earned during the plan year) to 100 percent.10

‘‘(E) DEFINITIONS.—For purposes of this11

subparagraph:12

‘‘(i) LIQUIDITY SHORTFALL.—The13

term ‘liquidity shortfall’ means, with re-14

spect to any required installment, an15

amount equal to the excess (as of the last16

day of the quarter for which such install-17

ment is made) of—18

‘‘(I) the base amount with re-19

spect to such quarter, over20

‘‘(II) the value (as of such last21

day) of the plan’s liquid assets.22

‘‘(ii) BASE AMOUNT.—23


‘base amount’ means, with respect to25

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146

H.L.C.

any quarter, an amount equal to 31



months ending on the last day of such4

quarter.5

‘‘(II) SPECIAL RULE.—If the6


(I) exceeds an amount equal to 28



months ending on the last day of the11

quarter and an enrolled actuary cer-12

tifies to the satisfaction of the Sec-13

retary that such excess is the result of14

nonrecurring circumstances, the base15

amount with respect to such quarter16

shall be determined without regard to17

amounts related to those nonrecurring18

circumstances.19

‘‘(iii) DISBURSEMENTS FROM THE20

PLAN.—The term ‘disbursements from the21

plan’ means all disbursements from the22

trust, including purchases of annuities,23

payments of single sums and other bene-24

fits, and administrative expenses.25

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147

H.L.C.

‘‘(iv) ADJUSTED DISBURSEMENTS.—1

The term ‘adjusted disbursements’ means2

disbursements from the plan reduced by3

the product of—4

‘‘(I) the plan’s funding target at-5

tainment percentage for the plan year,6

and7

‘‘(II) the sum of the purchases of8

annuities, payments of single sums,9

and such other disbursements as the10

Secretary shall provide in regulations.11

‘‘(v) LIQUID ASSETS.—The term ‘liq-12

uid assets’ means cash, marketable securi-13

ties, and such other assets as specified by14

the Secretary in regulations.15

‘‘(vi) QUARTER.—The term ‘quarter’16

means, with respect to any required install-17

ment, the 3-month period preceding the18

month in which the due date for such in-19

stallment occurs.20

‘‘(F) REGULATIONS.—The Secretary may21

prescribe such regulations as are necessary to22

carry out this paragraph.23

‘‘(k) IMPOSITION OF LIEN WHERE FAILURE TO24

MAKE REQUIRED CONTRIBUTIONS.—25

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148

H.L.C.

‘‘(1) IN GENERAL.—In the case of a plan to1

which this subsection applies, if—2

‘‘(A) any person fails to make a contribu-3

tion payment required by section 412 and this4

section before the due date for such payment,5

and6

‘‘(B) the unpaid balance of such payment7

(including interest), when added to the aggre-8

gate unpaid balance of all preceding such pay-9

ments for which payment was not made before10

the due date (including interest), exceeds11

$1,000,000,12

then there shall be a lien in favor of the plan in the13

amount determined under paragraph (3) upon all14

property and rights to property, whether real or per-15

sonal, belonging to such person and any other per-16

son who is a member of the same controlled group17

of which such person is a member.18

‘‘(2) PLANS TO WHICH SUBSECTION APPLIES.—19

This subsection shall apply to a defined benefit plan20

(other than a multiemployer plan) for any plan year21

for which the funding target attainment percentage22

(as defined in subsection (d)(2)) of such plan is less23

than 100 percent. This subsection shall not apply to24

any plan to which section 4021 of the Employee Re-25

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149

H.L.C.

tirement Income Security Act of 1974 does not1

apply (as such section is in effect on the date of the2

enactment of the Pension Protection Act of 2005).3

‘‘(3) AMOUNT OF LIEN.—For purposes of para-4

graph (1), the amount of the lien shall be equal to5

the aggregate unpaid balance of contribution pay-6

ments required under this section and section 4127

for which payment has not been made before the due8

date.9

‘‘(4) NOTICE OF FAILURE; LIEN.—10

‘‘(A) NOTICE OF FAILURE.—A person11

committing a failure described in paragraph (1)12

shall notify the Pension Benefit Guaranty Cor-13

poration of such failure within 10 days of the14

due date for the required contribution payment.15

‘‘(B) PERIOD OF LIEN.—The lien imposed16

by paragraph (1) shall arise on the due date for17

the required contribution payment and shall18

continue until the last day of the first plan year19

in which the plan ceases to be described in20

paragraph (1)(B). Such lien shall continue to21

run without regard to whether such plan con-22

tinues to be described in paragraph (2) during23

the period referred to in the preceding sentence.24

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150

H.L.C.

‘‘(C) CERTAIN RULES TO APPLY.—Any1

amount with respect to which a lien is imposed2

under paragraph (1) shall be treated as taxes3

due and owing the United States and rules4

similar to the rules of subsections (c), (d), and5

(e) of section 4068 of the Employee Retirement6

Income Security Act of 1974 shall apply with7

respect to a lien imposed by subsection (a) and8

the amount with respect to such lien.9

‘‘(5) ENFORCEMENT.—Any lien created under10

paragraph (1) may be perfected and enforced only11

by the Pension Benefit Guaranty Corporation, or at12

the direction of the Pension Benefit Guaranty Cor-13

poration, by the contributing sponsor (or any mem-14

ber of the controlled group of the contributing spon-15

sor).16


subsection—18

‘‘(A) CONTRIBUTION PAYMENT.—The term19

‘contribution payment’ means, in connection20

with a plan, a contribution payment required to21

be made to the plan, including any required in-22

stallment under paragraphs (3) and (4) of sub-23

section (i).24

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151

H.L.C.

‘‘(B) DUE DATE; REQUIRED INSTALL-1

MENT.—The terms ‘due date’ and ‘required in-2

stallment’ have the meanings given such terms3

by subsection (j), except that in the case of a4

payment other than a required installment, the5

due date shall be the date such payment is re-6

quired to be made under section 430.7

‘‘(C) CONTROLLED GROUP.—The term8

‘controlled group’ means any group treated as9

a single employer under subsections (b), (c),10

(m), and (o) of section 414.11

‘‘(l) QUALIFIED TRANSFERS TO HEALTH BENEFIT12

ACCOUNTS.—In the case of a qualified transfer (as de-13

fined in section 420), any assets so transferred shall not,14

for purposes of this section, be treated as assets in the15

plan.’’.16



ning after December 31, 2006.19

SEC. 113. BENEFIT LIMITATIONS UNDER SINGLE-EM-20

PLOYER PLANS.21

(a) PROHIBITION OF SHUTDOWN BENEFITS AND22

OTHER UNPREDICTABLE CONTINGENT EVENT BENEFITS23

UNDER SINGLE-EMPLOYER PLANS.—24

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H.L.C.

(1) IN GENERAL.—Part III of subchapter D of1

chapter 1 of the Internal Revenue Code of 1986 (re-2

lating to deferred compensation, etc.) is amended—3

(A) by striking the heading and inserting4

the following:5

‘‘PART III—RULES RELATING TO MINIMUM FUND-6

ING STANDARDS AND BENEFIT LIMITATIONS7

‘‘Subpart A. Minimum funding standards for pension plans.

‘‘Subpart B. Benefit limitations under single-employer plans.

‘‘Subpart A—Minimum Funding Standards for8

Pension Plans9

‘‘Sec. 430. Minimum funding standards for single-employer defined benefit pen-

sion plans.’’, and

(B) by adding at the end the following new10

subpart:11

‘‘Subpart B—Benefit Limitations Under Single-12

employer Plans13

‘‘Sec. 436. Funding-based limitation on shutdown benefits and other unpredict-

able contingent event benefits under single-employer plans.

‘‘SEC. 436. FUNDING-BASED LIMITATION ON SHUTDOWN14

BENEFITS AND OTHER UNPREDICTABLE CON-15

TINGENT EVENT BENEFITS UNDER SINGLE-16

EMPLOYER PLANS.17

‘‘(a) IN GENERAL.—No defined benefit plan (other18

than a multiemployer plan) may provide benefits to which19

participants are entitled solely by reason of the occurrence20

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153

H.L.C.

of a plant shutdown or any other unpredictable contingent1

event occurring during any plan year if the funding target2

attainment percentage as of the valuation date of the plan3

for such plan year—4

‘‘(1) is less than 80 percent, or5

‘‘(2) would be less than 80 percent taking into6

account such occurrence.7

‘‘(b) EXEMPTION.—Subsection (a) shall cease to8

apply with respect to any plan year, effective as of the9

first date of the plan year, upon payment by the plan10

sponsor of a contribution (in addition to any minimum re-11

quired contribution under section 430) equal to—12

‘‘(1) in the case of subsection (a)(1), the13

amount of the increase in the funding target of the14

plan (under section 430) for the plan year attrib-15

utable to the occurrence referred to in subsection16

(a), and17

‘‘(2) in the case of subsection (a)(2), the18

amount sufficient to result in a funding target at-19

tainment percentage of 80 percent.20

Rules similar to the rules of section 437(f) shall apply for21

purposes of this subsection.22

‘‘(c) UNPREDICTABLE CONTINGENT EVENT.—For23

purposes of this section, the term ‘unpredictable contin-24

gent event’ means an event other than—25

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154

H.L.C.

‘‘(1) attainment of any age, performance of any1

service, receipt or derivation of any compensation, or2

the occurrence of death or disability, or3

‘‘(2) an event which is reasonably and reliably4

predictable (as determined by the Secretary).5

‘‘(d) NEW PLANS.—Subsection (a) shall not apply to6

a plan for the first 5 plan years of the plan. For purposes7

of this subsection, the reference in this subsection to a8

plan shall include a reference to any predecessor plan.9

‘‘(e) DEEMED REDUCTION OF FUNDING BAL-10

ANCES.—A rule similar to the rule of section 437(h) shall11

apply for purposes of this section.’’.12

(2) CLERICAL AMENDMENT.—The table of13

parts for suchapter D of chapter 1 of the Internal14

Revenue Code of 1986 is amended by adding at the15

end the following new item:16

‘‘PART III�RULES RELATING TO MINIMUM FUNDING STANDARDS AND

BENEFIT LIMITATIONS’’.

(b) OTHER LIMITS ON BENEFITS AND BENEFIT AC-17

CRUALS.—18

(1) IN GENERAL.—Subpart B of part III of19

subchapter D of chapter 1 of such Code is amended20

by adding at the end the following:21

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‘‘SEC. 437. FUNDING-BASED LIMITS ON BENEFITS AND BEN-1

EFIT ACCRUALS UNDER SINGLE-EMPLOYER2

PLANS.3

‘‘(a) LIMITATIONS ON PLAN AMENDMENTS INCREAS-4

ING LIABILITY FOR BENEFITS.—5

‘‘(1) IN GENERAL.—No amendment to a de-6

fined benefit plan (other than a multiemployer plan)7

which has the effect of increasing liabilities of the8

plan by reason of increases in benefits, establish-9

ment of new benefits, changing the rate of benefit10

accrual, or changing the rate at which benefits be-11

come nonforfeitable to the plan may take effect dur-12

ing any plan year if the funding target attainment13

percentage as of the valuation date of the plan for14

such plan year is—15

‘‘(A) less than 80 percent, or16

‘‘(B) would be less than 80 percent taking17

into account such amendment.18

For purposes of this paragraph, any increase in ben-19

efits under the plan by reason of an increase in the20

benefit rate provided under the plan or on the basis21

of an increase in compensation shall be treated as22

effected by plan amendment.23

‘‘(2) EXEMPTION.—Paragraph (1) shall cease24

to apply with respect to any plan year, effective as25

of the first date of the plan year (or if later, the ef-26

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156

H.L.C.

fective date of the amendment), upon payment by1

the plan sponsor of a contribution (in addition to2

any minimum required contribution under section3

430) equal to—4

‘‘(A) in the case of paragraph (1)(A), the5

amount of the increase in the funding target of6

the plan (under section 430) for the plan year7

attributable to the amendment, and8

‘‘(B) in the case of paragraph (1)(B), the9

amount sufficient to result in a funding target10

attainment percentage of 80 percent.11

‘‘(b) FUNDING-BASED LIMITATION ON CERTAIN12

FORMS OF DISTRIBUTION.—13

‘‘(1) IN GENERAL.—A defined benefit plan14

(other than a multiemployer plan) shall provide that,15

in any case in which the plan’s funding target at-16

tainment percentage as of the valuation date of the17

plan for a plan year is less than 80 percent, the plan18

may not after such date pay any payment described19

in section 401(a)(32)(B).20

‘‘(2) EXCEPTION.—Paragraph (1) shall not21

apply to any plan for any plan year if the terms of22

such plan (as in effect for the period beginning on23

June 29, 2005, and ending with such plan year)24

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H.L.C.

provide for no benefit accruals with respect to any1

participant during such period.2

‘‘(c) LIMITATIONS ON BENEFIT ACCRUALS FOR3

PLANS WITH SEVERE FUNDING SHORTFALLS.—A de-4

fined benefit plan (other than a multiemployer plan) shall5

provide that, in any case in which the plan’s funding tar-6

get attainment percentage as of the valuation date of the7

plan for a plan year is less than 60 percent, all future8

benefit accruals under the plan shall cease as of such date.9

‘‘(d) NEW PLANS.—Subsections (a) and (c) shall not10

apply to a plan for the first 5 plan years of the plan. For11

purposes of this subsection, the reference in this sub-12

section to a plan shall include a reference to any prede-13

cessor plan.14

‘‘(e) PRESUMED UNDERFUNDING FOR PURPOSES OF15

BENEFIT LIMITATIONS BASED ON PRIOR YEAR’S FUND-16

ING STATUS.—17

‘‘(1) PRESUMPTION OF CONTINUED UNDER-18

FUNDING.—In any case in which a benefit limitation19

under subsection (a), (b), or (c) has been applied to20

a plan with respect to the plan year preceding the21

current plan year, the funding target attainment22

percentage of the plan as of the valuation date of23

the plan for the current plan year shall be presumed24

to be equal to the funding target attainment per-25

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158

H.L.C.

centage of the plan as of the valuation date of the1

plan for the preceding plan year until the enrolled2

actuary of the plan certifies the actual funding tar-3

get attainment percentage of the plan as of the valu-4

ation date of the plan for the current plan year.5

‘‘(2) PRESUMPTION OF UNDERFUNDING AFTER6

10TH MONTH.—In any case in which no such certifi-7

cation is made with respect to the plan before the8

first day of the 10th month of the current plan year,9

for purposes of subsections (a), (b), and (c), the10

plan’s funding target attainment percentage shall be11

conclusively presumed to be less than 60 percent as12

of the first day of such 10th month, and such day13

shall be deemed, for purposes of such subsections, to14

be the valuation date of the plan for the current15

plan year.16

‘‘(3) PRESUMPTION OF UNDERFUNDING AFTER17

4TH MONTH FOR NEARLY UNDERFUNDED PLANS.—18

In any case in which—19

‘‘(A) a benefit limitation under subsection20

(a), (b), or (c) did not apply to a plan with re-21

spect to the plan year preceding the current22

plan year, but the funding target attainment23

percentage of the plan for such preceding plan24

year was not more than 10 percentage points25

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H.L.C.

greater than the percentage which would have1

caused such subsection to apply to the plan2

with respect to such preceding plan year, and3

‘‘(B) as of the first day of the 4th month4

of the current plan year, the enrolled actuary of5

the plan has not certified the actual funding6

target attainment percentage of the plan as of7

the valuation date of the plan for the current8

plan year,9

until the enrolled actuary so certifies, such first day10

shall be deemed, for purposes of such subsection, to11

be the valuation date of the plan for the current12

plan year and the funding target attainment per-13

centage of the plan as of such first day shall, for14

purposes of such subsection, be presumed to be15

equal to 10 percentage points less than the funding16

target attainment percentage of the plan as of the17

valuation date of the plan for such preceding plan18

year.19

‘‘(f) RESTORATION BY PLAN AMENDMENT OF BENE-20

FITS OR BENEFIT ACCRUAL.—In any case in which a pro-21

hibition under subsection (b) of a payment described in22

subsection (b)(1) or a cessation of benefit accruals under23

subsection (c) is applied to a plan with respect to any plan24

year and such prohibition or cessation, as the case may25

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H.L.C.

be, ceases to apply to any subsequent plan year, the plan1

may provide for the resumption of such benefit payment2

or such benefit accrual only by means of the adoption of3

a plan amendment after the valuation date of the plan4

for such subsequent plan year. The preceding sentence5

shall not apply to a prohibition or cessation required by6

reason of subsection (e).7

‘‘(g) FUNDING TARGET ATTAINMENT PERCENT-8

AGE.—9


tion, the term ‘funding target attainment percent-11

age’ means, with respect to any plan for any plan12

year, the ratio (expressed as a percentage) which—13


year (as determined under section 430(g)) re-15

duced by the pre-funding balance and the fund-16

ing standard carryover balance (within the17

meaning of section 430(f)), bears to18



430(d)(1), but without regard to section21

430(i)(1)).22

‘‘(2) APPLICATION TO PLANS WHICH ARE23

FULLY FUNDED WITHOUT REGARD TO REDUCTIONS24

FOR FUNDING BALANCES.—25

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‘‘(A) IN GENERAL.—In the case of a plan1

for any plan year, if the funding target attain-2

ment percentage is 100 percent or more (deter-3

mined without regard to this subparagraph and4

without regard to the reduction under para-5

graph (1)(A) for the pre-funding balance and6

the funding standard carryover balance), para-7

graph (1) shall be applied without regard to8

such reduction.9

‘‘(B) TRANSITION RULE.—Subparagraph10

(A) shall be applied to plan years beginning11

after 2006 and before 2011 by substituting for12

‘100 percent’ the applicable percentage deter-13

mined in accordance with the following table:14




‘‘(C) LIMITATION.—Subparagraph (B)15

shall not apply with respect to any plan year16

after 2007 unless the funding target attainment17

percentage (determined without regard to this18

paragraph and without regard to the reduction19

under paragraph (1)(A) for the pre-funding bal-20

ance and the funding standard carryover bal-21

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162

H.L.C.

ance) of the plan for each preceding plan year1

after 2006 was not less than the applicable per-2

centage with respect to such preceding plan3

year determined under subparagraph (B).4

‘‘(h) DEEMED REDUCTION OF FUNDING BAL-5

ANCES.—In the case of a plan maintained pursuant to 16

or more collective bargaining agreements between em-7

ployee representatives and 1 or more employers—8

‘‘(1) IN GENERAL.—In any case in which a ben-9

efit limitation under subsection (a), (b), or (c) would10

(but for this subsection and determined without re-11

gard to subsection (a)(2)) apply to such plan for the12

plan year, the plan sponsor of such plan shall be13

treated for purposes of this title as having made an14

election under section 430(f)(5) to reduce the bal-15

ance of the pre-funding balance and the funding16

standard carryover balance for the plan year (in a17

manner consistent with the requirements of section18

430(f)(5)(B)) by such amount as is necessary for19

such benefit limitation to not apply to the plan for20

such plan year.21

‘‘(2) EXCEPTION FOR INSUFFICIENT FUNDING22

BALANCES.—Paragraph (1) shall not apply with re-23

spect to a benefit limitation for any plan year if the24

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H.L.C.

application of paragraph (1) would not result in the1

benefit limitation not applying for such plan year.’’.2

(2) CLERICAL AMENDMENT.—The table of sec-3

tions for such subpart is amended by adding at the4

end the following new item:5

‘‘Sec. 437. Funding-based limits on benefits and benefit accruals under single-

employer plans.’’.

(c) EFFECTIVE DATE.—6

(1) SHUTDOWN BENEFITS.—Except as provided7

in paragraph (3), the amendments made by sub-8

section (a) shall apply with respect to plant shut-9

downs, or other unpredictable contingent events, oc-10

curring after December 31, 2006.11

(2) OTHER BENEFITS.—Except as provided in12

paragraph (3), the amendments made by subsection13

(b) shall apply with respect to plan years beginning14


(3) COLLECTIVE BARGAINING EXCEPTION.—In16

the case of a plan maintained pursuant to 1 or more17

collective bargaining agreements between employee18

representatives and 1 or more employers ratified be-19

fore the date of the enactment of this Act, the20

amendments made by this subsection shall not apply21

to plan years beginning before the earlier of—22

(A) the later of—23

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(i) the date on which the last collec-1

tive bargaining agreement relating to the2

plan terminates (determined without re-3

gard to any extension thereof agreed to4

after the date of the enactment of this5

Act), or6

(ii) the first day of the first plan year7

to which the amendments made by this8

subsection would (but for this subpara-9

graph) apply, or10

(B) January 1, 2009.11

For purposes of clause (i), any plan amendment12

made pursuant to a collective bargaining agreement13

relating to the plan which amends the plan solely to14

conform to any requirement added by this subsection15

shall not be treated as a termination of such collec-16

tive bargaining agreement.17

(d) SPECIAL RULE FOR 2007.—For purposes of ap-18

plying subsection (e) of section 437 of such Code (as19

added by this section) to current plan years (within the20

meaning of such subsection) beginning in 2007, the modi-21

fied funded current liability percentage of the plan for the22

preceding year shall be substituted for the funding target23

attainment percentage of the plan for the preceding year.24

For purposes of the preceding sentence, the term ‘‘modi-25

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165

H.L.C.

fied funded current liability percentage’’ means the funded1

current liability percentage (as defined in section 412(l)(8)2

of such Code), reduced as described in subparagraph (E)3

thereof in the case of a plan with a funded current liability4

percentage (as so defined and before such reduction)5

which is less than 100 percent.6

SEC. 114. TECHNICAL AND CONFORMING AMENDMENTS.7

(a) AMENDMENTS RELATED TO QUALIFICATION RE-8

QUIREMENTS.—9

(1) Section 401(a)(29) of the Internal Revenue10

Code of 1986 is amended to read as follows:11

‘‘(29) BENEFIT LIMITATIONS ON PLANS IN AT-12

RISK STATUS.—In the case of a defined benefit plan13

(other than a multiemployer plan) to which the re-14

quirements of section 412 apply, the trust of which15

the plan is a part shall not constitute a qualified16

trust under this subsection unless the plan meets the17

requirements of sections 436 and 437.’’.18

(2) Section 401(a)(32) of such Code is19

amended—20

(A) in subparagraph (A), by striking21

‘‘412(m)(5)’’ each place it appears and insert-22

ing ‘‘430(j)(4)’’, and23

(B) in subparagraph (C), by striking ‘‘sec-24

tion 412(m) by reason of paragraph (5)(A)25

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166

H.L.C.

thereof’’ and inserting ‘‘section 430(j)(3) by1

reason of section 430(j)(4)(A)’’.2


amended—4

(A) in subparagraph (B)(i), by striking5

‘‘funded current liability percentage (as defined6

in section 412(l)(8))’’ and inserting ‘‘funding7

target attainment percentage (as defined in sec-8

tion 430(d)(2))’’,9

(B) in subparagraph (B)(iii), by striking10

‘‘subsection 412(c)(8)’’ and inserting ‘‘section11

412(d)(2)’’, and12

(C) in subparagraph (D), by striking ‘‘sec-13

tion 412(c)(11) (without regard to subpara-14

graph (B) thereof)’’ and inserting ‘‘section15

412(b) (without regard to paragraph (2) there-16

of)’’.17

(b) VESTING RULES.—Section 411 of such Code is18

amended—19

(1) by striking ‘‘section 412(c)(8)’’ in sub-20

section (a)(3)(C) and inserting ‘‘section 412(d)(2)’’,21

(2) in subsection (b)(1)(F)—22

(A) by striking ‘‘paragraphs (2) and (3) of23

section 412(i)’’ in clause (ii) and inserting24

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H.L.C.

‘‘subparagraphs (B) and (C) of section1

412(e)(3)’’, and2

(B) by striking ‘‘paragraphs (4), (5), and3

(6) of section 412(i)’’ and inserting ‘‘subpara-4

graphs (D), (E), and (F) of section 412(e)(3)’’,5

and6

(3) by striking ‘‘section 412(c)(8)’’ in sub-7

section (d)(6)(A) and inserting ‘‘section 412(d)(2)’’.8

(c) MERGERS AND CONSOLIDATIONS OF PLANS.—9

Subclause (I) of section 414(l)(2)(B)(i) of such Code is10

amended to read as follows:11

‘‘(I) the amount determined12

under section 431(c)(6)(A)(i) in the13

case of a multiemployer plan (and the14

sum of the target liability amount and15

target normal cost determined under16

section 430 in the case of any other17

plan), over’’.18

(d) TRANSFER OF EXCESS PENSION ASSETS TO RE-19

TIREE HEALTH ACCOUNTS.—20

(1) Section 420(e)(2) of such Code is amended21

to read as follows:22

‘‘(2) EXCESS PENSION ASSETS.—The term ‘ex-23

cess pension assets’ means the excess (if any) of—24

‘‘(A) the lesser of—25

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H.L.C.

‘‘(i) the fair market value of the1

plan’s assets (reduced by the pre-funding2

balance and the funding standard carry-3

over balance, as determined under section4

430(f)), or5

‘‘(ii) the value of plan assets as deter-6

mined under section 430(g)(3) (reduced by7


standard carryover balance, as determined9

under section 430(f)), over10

‘‘(B) 125 percent of the sum of the target11

liability amount and the target normal cost de-12

termined under section 430 for such plan13

year.’’.14


to read as follows:16

‘‘(4) COORDINATION WITH SECTION 430.—In17

the case of a qualified transfer, any assets so trans-18

ferred shall not, for purposes of this section, be19

treated as assets in the plan.’’.20

(e) EXCISE TAXES.—21

(1) IN GENERAL.—Subsections (a) and (b) of22

section 4971 of such Code are amended to read as23

follows:24

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H.L.C.

‘‘(a) INITIAL TAX.—If at any time during any taxable1

year an employer maintains a plan to which section 4122

applies, there is hereby imposed for the taxable year a tax3

equal to—4

‘‘(1) in the case of a defined benefit plan which5

is not a multiemployer plan, 10 percent of the aggre-6

gate unpaid minimum required contributions for all7

plan years remaining unpaid as of the end of any8

plan year ending with or within the taxable year,9

and10

‘‘(2) in the case of a multiemployer plan, 5 per-11

cent of the accumulated funding deficiency deter-12

mined under section 431 as of the end of any plan13

year ending with or within the taxable year.14

‘‘(b) ADDITIONAL TAX.—If—15

‘‘(1) a tax is imposed under subsection (a)(1)16

on any unpaid required minimum contribution and17

such amount remains unpaid as of the close of the18

taxable period, or19

‘‘(2) a tax is imposed under subsection (a)(2)20

on any accumulated funding deficiency and the accu-21

mulated funding deficiency is not corrected within22

the taxable period,23

there is hereby imposed a tax equal to 100 percent of the24

unpaid minimum required contribution or accumulated25

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H.L.C.

funding deficiency, whichever is applicable, to the extent1

not so paid or corrected.’’.2

(2) Section 4971(c) of such Code is amended—3

(A) by striking ‘‘the last two sentences of4

section 412(a)’’ in paragraph (1) and inserting5

‘‘section 431’’, and6

(B) by adding at the end the following new7

paragraph:8

‘‘(4) UNPAID MINIMUM REQUIRED CONTRIBU-9

TION.—10

‘‘(A) IN GENERAL.—The term ‘unpaid11

minimum required contribution’ means, with re-12

spect to any plan year, any minimum required13

contribution under section 430 for the plan14

year which is not paid on or before the due date15

(as determined under section 430(j)(1)) for the16

plan year.17

‘‘(B) ORDERING RULE.—Any payment to18

or under a plan for any plan year shall be allo-19

cated first to unpaid minimum required con-20

tributions for all preceding plan years in the21

order in which such contributions became due22

and then to the minimum required contribution23

under section 430 for the plan year.’’.24

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by striking ‘‘section 412(b)(3)(A)’’ and inserting2

‘‘section 412(a)(2)’’.3

(4) Section 4971(f)(1) of such Code is4

amended—5

(A) by striking ‘‘section 412(m)(5)’’ and6

inserting ‘‘section 430(j)(4)’’, and7

(B) by striking ‘‘section 412(m)’’ and in-8

serting ‘‘section 430(j)(3)’’.9

(5) Section 4972(c)(7) of such Code is amended10

by striking ‘‘except to the extent that such contribu-11

tions exceed the full-funding limitation (as defined in12

section 412(c)(7), determined without regard to sub-13

paragraph (A)(i)(I) thereof)’’ and inserting ‘‘except,14

in the case of a multiemployer plan, to the extent15

that such contributions exceed the full-funding limi-16

tation (as defined in section 431(c)(6))’’.17

(f) REPORTING REQUIREMENTS.—Section 6059(b) of18

such Code is amended—19

(1) by striking ‘‘the accumulated funding defi-20

ciency (as defined in section 412(a))’’ in paragraph21

(2) and inserting ‘‘the minimum required contribu-22

tion determined under section 430, or the accumu-23

lated funding deficiency determined under section24

431,’’, and25

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H.L.C.

(2) by striking paragraph (3)(B) and inserting:1

‘‘(B) the requirements for reasonable actu-2

arial assumptions under section 430(h)(1) or3

431(c)(3), whichever are applicable, have been4

complied with,’’.5

(g) EFFECTIVE DATE.—The amendments made by6

this section shall apply to years beginning after December7

31, 2006.8

Subtitle C—Other Provisions9

SEC. 121. MODIFICATION OF TRANSITION RULE TO PEN-10

SION FUNDING REQUIREMENTS.11

(a) IN GENERAL.—In the case of a plan that—12

(1) was not required to pay a variable rate pre-13

mium for the plan year beginning in 1996,14

(2) has not, in any plan year beginning after15

1995, merged with another plan (other than a plan16

sponsored by an employer that was in 1996 within17

the controlled group of the plan sponsor); and18

(3) is sponsored by a company that is engaged19

primarily in the interurban or interstate passenger20

bus service,21

the rules described in subsection (b) shall apply for any22

plan year beginning after December 31, 2006.23

(b) MODIFIED RULES.—The rules described in this24

subsection are as follows:25

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H.L.C.

(1) For purposes of section 430(j)(3) of the In-1

ternal Revenue Code of 1986 and section 303(j)(3)2

of the Employee Retirement Income Security Act of3

1974, the plan shall be treated as not having a fund-4

ing shortfall for any plan year.5

(2) For purposes of—6

(A) determining unfunded vested benefits7

under section 4006(a)(3)(E)(iii) of such Act,8

and9

(B) determining any present value or mak-10

ing any computation under section 412 of such11

Code or section 302 of such Act,12

the mortality table shall be the mortality table used13

by the plan.14

(3) Section 430(c)(5)(B) of such Code and sec-15

tion 303(c)(5)(B) of such Act (relating to phase-in16

of funding target for exemption from new shortfall17

amortization base) shall each be applied by sub-18

stituting ‘‘2012’’ for ‘‘2011’’ therein and by sub-19

stituting for the table therein the following:20

In the case of a plan year beginning in calendaryear:


2007 .............................................................................................. 90 percent2008 .............................................................................................. 92 percent2009 .............................................................................................. 94 percent2010 .............................................................................................. 96 percent2011 .............................................................................................. 98 percent.

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(c) DEFINITIONS.—Any term used in this section1

which is also used in section 430 of such Code or section2

303 of such Act shall have the meaning provided such3

term in such section. If the same term has a different4

meaning in such Code and such Act, such term shall, for5

purposes of this section, have the meaning provided by6

such Code when applied with respect to such Code and7

the meaning provided by such Act when applied with re-8

spect to such Act.9

(d) SPECIAL RULE FOR 2006.—10

(1) IN GENERAL.—Section 769(c)(3) of the Re-11

tirement Protection Act of 1994, as added by section12

201 of the Pension Funding Equity Act of 2004, is13

amended by striking ‘‘and 2005’’ and inserting ‘‘,14

2005, and 2006’’.15

(2) EFFECTIVE DATE.—The amendment made16

by paragraph (1) shall apply to plan years beginning17


(e) CONFORMING AMENDMENT.—19

(1) Section 769 of the Retirement Protection20

Act of 1994 is amended by striking subsection (c).21

(2) The amendment made by paragraph (1)22

shall take effect on December 31, 2006, and shall23

apply to plan years beginning after such date.24

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SEC. 122. TREATMENT OF NONQUALIFIED DEFERRED COM-1

PENSATION PLANS WHEN EMPLOYER DE-2

FINED BENEFIT PLAN IN AT-RISK STATUS.3

(a) IN GENERAL.—Subsection (b) of section 409A of4

the Internal Revenue Code of 1986 (providing rules relat-5

ing to funding) is amended by redesignating paragraphs6

(3) and (4) as paragraphs (4) and (5), respectively, and7

by inserting after paragraph (2) the following new para-8

graph:9

‘‘(3) EMPLOYER’S DEFINED BENEFIT PLAN IN10

AT-RISK STATUS.—If—11

‘‘(A) during any period in which a defined12

benefit plan to which section 412 applies is in13

an at-risk status (as defined in section14

430(i)(3)), assets are set aside (directly or indi-15

rectly) in a trust (or other arrangement deter-16

mined by the Secretary), or transferred to such17

a trust or other arrangement, for purposes of18

paying deferred compensation under a non-19

qualified deferred compensation plan of the em-20

ployer maintaining the defined benefit plan, or21

‘‘(B) a nonqualified deferred compensation22

plan of the employer provides that assets will23

become restricted to the provision of benefits24

under the plan in connection with such at-risk25

status (or other similar financial measure deter-26

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mined by the Secretary) of the defined benefit1

plan, or assets are so restricted,2

such assets shall for purposes of section 83 be treat-3

ed as property transferred in connection with the4

performance of services whether or not such assets5

are available to satisfy claims of general creditors.6

Subparagraph (A) shall not apply with respect to7

any assets which are so set aside before the defined8

benefit plan is in at-risk status.’’.9

(b) CONFORMING AMENDMENTS.—Paragraphs (4)10

and (5) of section 409A(b) of such Code, as redesignated11

by subsection (a) of this subsection, are each amended by12

striking ‘‘paragraph (1) or (2)’’ each place it appears and13

inserting ‘‘paragraph (1), (2), or (3)’’.14


this section shall apply to transfers or reservations of as-16

sets after December 31, 2005.17

(d) SPECIAL RULE FOR 2006.—For purposes of de-18

termining if a plan is in at-risk status (within the meaning19

of section 409A of such Code, as added by this section)20

for any plan year beginning in 2006, such section shall21

be applied by substituting the plan’s modified funded cur-22

rent liability percentage for the plan’s funding target at-23

tainment percentage. For purposes of the preceding sen-24

tence, the term ‘‘modified funded current liability percent-25

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age’’ means the funded current liability percentage (as de-1

fined in section 412(l)(8) of such Code), reduced as de-2

scribed in subparagraph (E) thereof.3

TITLE II—FUNDING RULES FOR4

MULTIEMPLOYER DEFINED5

BENEFIT PLANS6

Subtitle A—Amendments to Em-7

ployee Retirement Income Secu-8

rity Act of 19749

SEC. 201. FUNDING RULES FOR MULTIEMPLOYER DEFINED10

BENEFIT PLANS.11



amended by section 102) is amended further by inserting14

after section 303 the following new section:15

‘‘MINIMUM FUNDING STANDARDS FOR MULTIEMPLOYER16

PLANS17

‘‘SEC. 304. (a) IN GENERAL.—For purposes of sec-18

tion 302, the accumulated funding deficiency of a multi-19

employer plan for any plan year is—20

‘‘(1) except as provided in paragraph (2), the21

amount, determined as of the end of the plan year,22

equal to the excess (if any) of the total charges to23

the funding standard account of the plan for all plan24

years (beginning with the first plan year for which25

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this part applies to the plan) over the total credits1

to such account for such years, and2

‘‘(2) if the multiemployer plan is in reorganiza-3

tion for any plan year, the accumulated funding de-4

ficiency of the plan determined under section 4243.5

‘‘(b) FUNDING STANDARD ACCOUNT.—6

‘‘(1) ACCOUNT REQUIRED.—Each multiem-7

ployer plan to which this part applies shall establish8

and maintain a funding standard account. Such ac-9

count shall be credited and charged solely as pro-10

vided in this section.11

‘‘(2) CHARGES TO ACCOUNT.—For a plan year,12

the funding standard account shall be charged with13

the sum of—14

‘‘(A) the normal cost of the plan for the15

plan year,16

‘‘(B) the amounts necessary to amortize in17

equal annual installments (until fully amor-18

tized)—19

‘‘(i) in the case of a plan in existence20

on January 1, 1974, the unfunded past21

service liability under the plan on the first22

day of the first plan year to which this23

part applies, over a period of 40 plan24

years,25

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‘‘(ii) in the case of a plan which comes1

into existence after January 1, 1974, the2

unfunded past service liability under the3

plan on the first day of the first plan year4

to which this part applies, over a period of5

15 plan years,6

‘‘(iii) separately, with respect to each7

plan year, the net increase (if any) in un-8

funded past service liability under the plan9

arising from plan amendments adopted in10

such year, over a period of 15 plan years,11

‘‘(iv) separately, with respect to each12

plan year, the net experience loss (if any)13

under the plan, over a period of 15 plan14

years, and15

‘‘(v) separately, with respect to each16

plan year, the net loss (if any) resulting17

from changes in actuarial assumptions18

used under the plan, over a period of 1519

plan years,20

‘‘(C) the amount necessary to amortize21

each waived funding deficiency (within the22

meaning of section 302(c)(3)) for each prior23

plan year in equal annual installments (until24

fully amortized) over a period of 15 plan years,25

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‘‘(D) the amount necessary to amortize in1


tized) over a period of 5 plan years any amount3

credited to the funding standard account under4

section 302(b)(3)(D) (as in effect on the day5

before the date of the enactment of the Pension6

Protection Act of 2005), and7

‘‘(E) the amount necessary to amortize in8


tized) over a period of 20 years the contribu-10

tions which would be required to be made under11

the plan but for the provisions of section12

302(c)(7)(A)(i)(I) (as in effect on the day be-13

fore the date of the enactment of the Pension14

Protection Act of 2005).15

‘‘(3) CREDITS TO ACCOUNT.—For a plan year,16

the funding standard account shall be credited with17

the sum of—18

‘‘(A) the amount considered contributed by19

the employer to or under the plan for the plan20

year,21

‘‘(B) the amount necessary to amortize in22


tized)—24

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‘‘(i) separately, with respect to each1

plan year, the net decrease (if any) in un-2




‘‘(ii) separately, with respect to each6

plan year, the net experience gain (if any)7


years, and9


plan year, the net gain (if any) resulting11



plan years,14

‘‘(C) the amount of the waived funding de-15

ficiency (within the meaning of section16

302(c)(3)) for the plan year, and17

‘‘(D) in the case of a plan year for which18

the accumulated funding deficiency is deter-19

mined under the funding standard account if20

such plan year follows a plan year for which21

such deficiency was determined under the alter-22

native minimum funding standard under section23

305 (as in effect on the day before the date of24

the enactment of the Pension Protection Act of25

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H.L.C.

2005), the excess (if any) of any debit balance1

in the funding standard account (determined2

without regard to this subparagraph) over any3

debit balance in the alternative minimum fund-4

ing standard account.5

‘‘(4) SPECIAL RULES FOR CERTAIN PRE-20076

AMORTIZATIONS.—7

‘‘(A) IN GENERAL.—In the case of any8

amount amortized under section 302(b) (as in9

effect on the day before the date of the enact-10

ment of the Pension Protection Act of 2005)11

over any period beginning with a plan year be-12

ginning before 2007, in lieu of the amortization13

described in paragraphs (2)(B) and (3)(B),14

such amount shall continue to be amortized15

under such section as so in effect.16

‘‘(B) INTEREST RATE.—For purposes of17

amortizations under section 302(b) (as in effect18

on the day before the date of the enactment of19

the Pension Protection Act of 2005), in the20

case of any waiver under section 303 (as so in21

effect) or extension under section 304 (as so in22

effect) with respect to which application has23

been made before June 30, 2005, the interest24

rate under section 303(a)(2) (as so in effect) or25

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H.L.C.

section 304(a) (as so in effect), as the case may1

be, shall apply.2

‘‘(5) COMBINING AND OFFSETTING AMOUNTS3

TO BE AMORTIZED.—Under regulations prescribed4

by the Secretary of the Treasury, amounts required5

to be amortized under paragraph (2) or paragraph6

(3), as the case may be—7

‘‘(A) may be combined into one amount8

under such paragraph to be amortized over a9

period determined on the basis of the remaining10

amortization period for all items entering into11

such combined amount, and12

‘‘(B) may be offset against amounts re-13

quired to be amortized under the other such14

paragraph, with the resulting amount to be am-15

ortized over a period determined on the basis of16

the remaining amortization periods for all items17

entering into whichever of the two amounts18

being offset is the greater.19

‘‘(6) INTEREST.—Except as provided in sub-20

section (c)(9), the funding standard account (and21

items therein) shall be charged or credited (as deter-22

mined under regulations prescribed by the Secretary23

of the Treasury) with interest at the appropriate24

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H.L.C.

rate consistent with the rate or rates of interest used1

under the plan to determine costs.2

‘‘(7) CERTAIN AMORTIZATION CHARGES AND3

CREDITS.—In the case of a plan which, immediately4

before the date of the enactment of the Multiem-5

ployer Pension Plan Amendments Act of 1980, was6

a multiemployer plan (within the meaning of section7

3(37) as in effect immediately before such date)—8

‘‘(A) any amount described in paragraph9

(2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub-10

section which arose in a plan year beginning be-11

fore such date shall be amortized in equal an-12

nual installments (until fully amortized) over 4013

plan years, beginning with the plan year in14

which the amount arose,15

‘‘(B) any amount described in paragraph16

(2)(B)(iv) or (3)(B)(ii) of this subsection which17

arose in a plan year beginning before such date18

shall be amortized in equal annual installments19

(until fully amortized) over 20 plan years, be-20

ginning with the plan year in which the amount21

arose,22

‘‘(C) any change in past service liability23

which arises during the period of 3 plan years24

beginning on or after such date, and results25

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from a plan amendment adopted before such1

date, shall be amortized in equal annual install-2

ments (until fully amortized) over 40 plan3

years, beginning with the plan year in which the4

change arises, and5

‘‘(D) any change in past service liability6



from the changing of a group of participants9

from one benefit level to another benefit level10

under a schedule of plan benefits which—11

‘‘(i) was adopted before such date,12

and13

‘‘(ii) was effective for any plan partici-14

pant before the beginning of the first plan15

year beginning on or after such date,16



ginning with the plan year in which the change19

arises.20

‘‘(8) SPECIAL RULES RELATING TO CHARGES21

AND CREDITS TO FUNDING STANDARD ACCOUNT.—22


‘‘(A) WITHDRAWAL LIABILITY.—Any24

amount received by a multiemployer plan in25

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payment of all or part of an employer’s with-1

drawal liability under part 1 of subtitle E of2

title IV shall be considered an amount contrib-3

uted by the employer to or under the plan. The4

Secretary of the Treasury may prescribe by reg-5

ulation additional charges and credits to a mul-6

tiemployer plan’s funding standard account to7

the extent necessary to prevent withdrawal li-8

ability payments from being unduly reflected as9

advance funding for plan liabilities.10

‘‘(B) ADJUSTMENTS WHEN A MULTIEM-11

PLOYER PLAN LEAVES REORGANIZATION.—If a12

multiemployer plan is not in reorganization in13

the plan year but was in reorganization in the14

immediately preceding plan year, any balance in15

the funding standard account at the close of16

such immediately preceding plan year—17

‘‘(i) shall be eliminated by an offset-18

ting credit or charge (as the case may be),19

but20

‘‘(ii) shall be taken into account in21

subsequent plan years by being amortized22

in equal annual installments (until fully23

amortized) over 30 plan years.24

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The preceding sentence shall not apply to the1

extent of any accumulated funding deficiency2

under section 4243(a) as of the end of the last3

plan year that the plan was in reorganization.4

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL5

PROGRAM OR WITHDRAWAL LIABILITY PAYMENT6

FUND.—Any amount paid by a plan during a7

plan year to the Pension Benefit Guaranty Cor-8

poration pursuant to section 4222 of this Act or9

to a fund exempt under section 501(c)(22) of10

the Internal Revenue Code of 1986 pursuant to11

section 4223 of this Act shall reduce the12

amount of contributions considered received by13


‘‘(D) INTERIM WITHDRAWAL LIABILITY15

PAYMENTS.—Any amount paid by an employer16

pending a final determination of the employer’s17

withdrawal liability under part 1 of subtitle E18

of title IV and subsequently refunded to the19

employer by the plan shall be charged to the20

funding standard account in accordance with21

regulations prescribed by the Secretary of the22

Treasury.23

‘‘(E) ELECTION FOR DEFERRAL OF24

CHARGE FOR PORTION OF NET EXPERIENCE25

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LOSS.—If an election is in effect under section1

302(b)(7)(F) (as in effect on the day before the2

date of the enactment of the Pension Protection3

Act of 2005) for any plan year, the funding4

standard account shall be charged in the plan5

year to which the portion of the net experience6

loss deferred by such election was deferred with7

the amount so deferred (and paragraph8

(2)(B)(iv) shall not apply to the amount so9

charged).10

‘‘(F) FINANCIAL ASSISTANCE.—Any11

amount of any financial assistance from the12

Pension Benefit Guaranty Corporation to any13

plan, and any repayment of such amount, shall14

be taken into account under this section and15

section 302 in such manner as is determined by16

the Secretary of the Treasury.17

‘‘(G) SHORT-TERM BENEFITS.—To the ex-18

tent that any plan amendment increases the un-19

funded past service liability under the plan by20

reason of an increase in benefits which are pay-21

able under the plan during a period that does22

not exceed 14 years, paragraph (2)(B)(iii) shall23

be applied separately with respect to such in-24

crease in unfunded past service liability by sub-25

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H.L.C.

stituting the number of years of the period dur-1

ing which such benefits are payable for ‘15’.2

‘‘(c) ADDITIONAL RULES.—3

‘‘(1) DETERMINATIONS TO BE MADE UNDER4

FUNDING METHOD.—For purposes of this section,5

normal costs, accrued liability, past service liabilities,6

and experience gains and losses shall be determined7

under the funding method used to determine costs8

under the plan.9

‘‘(2) VALUATION OF ASSETS.—10


section, the value of the plan’s assets shall be12

determined on the basis of any reasonable actu-13

arial method of valuation which takes into ac-14

count fair market value and which is permitted15

under regulations prescribed by the Secretary of16

the Treasury.17

‘‘(B) ELECTION WITH RESPECT TO18

BONDS.—The value of a bond or other evidence19

of indebtedness which is not in default as to20

principal or interest may, at the election of the21

plan administrator, be determined on an amor-22

tized basis running from initial cost at purchase23

to par value at maturity or earliest call date.24

Any election under this subparagraph shall be25

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made at such time and in such manner as the1

Secretary of the Treasury shall by regulations2

provide, shall apply to all such evidences of in-3

debtedness, and may be revoked only with the4

consent of such Secretary.5

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA-6

SONABLE.—For purposes of this section, all costs, li-7

abilities, rates of interest, and other factors under8

the plan shall be determined on the basis of actu-9

arial assumptions and methods—10






under the plan.16

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX-17

PERIENCE GAIN OR LOSS.—For purposes of this sec-18

tion, if—19

‘‘(A) a change in benefits under the Social20

Security Act or in other retirement benefits cre-21

ated under Federal or State law, or22

‘‘(B) a change in the definition of the term23

‘wages’ under section 3121 of the Internal Rev-24

enue Code of 1986, or a change in the amount25

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H.L.C.

of such wages taken into account under regula-1

tions prescribed for purposes of section2

401(a)(5) of such Code,3

results in an increase or decrease in accrued liability4

under a plan, such increase or decrease shall be5

treated as an experience loss or gain.6

‘‘(5) FULL FUNDING.—If, as of the close of a7

plan year, a plan would (without regard to this para-8

graph) have an accumulated funding deficiency in9

excess of the full funding limitation—10

‘‘(A) the funding standard account shall be11

credited with the amount of such excess, and12

‘‘(B) all amounts described in subpara-13

graphs (B), (C), and (D) of subsection (b)(2)14

and subparagraph (B) of subsection (b)(3)15

which are required to be amortized shall be con-16

sidered fully amortized for purposes of such17

subparagraphs.18

‘‘(6) FULL-FUNDING LIMITATION.—19

‘‘(A) IN GENERAL.—For purposes of para-20

graph (5), the term ‘full-funding limitation’21

means the excess (if any) of—22

‘‘(i) the accrued liability (including23

normal cost) under the plan (determined24

under the entry age normal funding meth-25

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H.L.C.

od if such accrued liability cannot be di-1

rectly calculated under the funding method2

used for the plan), over3

‘‘(ii) the lesser of—4

‘‘(I) the fair market value of the5

plan’s assets, or6

‘‘(II) the value of such assets de-7

termined under paragraph (2).8

‘‘(B) MINIMUM AMOUNT.—9

‘‘(i) IN GENERAL.—In no event shall10

the full-funding limitation determined11

under subparagraph (A) be less than the12

excess (if any) of—13

‘‘(I) 90 percent of the current li-14

ability of the plan (including the ex-15

pected increase in current liability due16

to benefits accruing during the plan17

year), over18

‘‘(II) the value of the plan’s as-19

sets determined under paragraph (2).20

‘‘(ii) ASSETS.—For purposes of clause21

(i), assets shall not be reduced by any22

credit balance in the funding standard ac-23

count.24

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H.L.C.

‘‘(C) FULL FUNDING LIMITATION.—For1

purposes of this paragraph, unless otherwise2

provided by the plan, the accrued liability under3

a multiemployer plan shall not include benefits4

which are not nonforfeitable under the plan5

after the termination of the plan (taking into6

consideration section 411(d)(3) of the Internal7

Revenue Code of 1986).8

‘‘(D) CURRENT LIABILITY.—For purposes9


‘‘(i) IN GENERAL.—The term ‘current11

liability’ means all liabilities to employees12

and their beneficiaries under the plan.13

‘‘(ii) TREATMENT OF UNPREDICTABLE14

CONTINGENT EVENT BENEFITS.—For pur-15

poses of clause (i), any benefit contingent16

on an event other than—17

‘‘(I) age, service, compensation,18

death, or disability, or19

‘‘(II) an event which is reason-20

ably and reliably predictable (as deter-21

mined by the Secretary of the Treas-22

ury),23

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194

H.L.C.

shall not be taken into account until the1

event on which the benefit is contingent oc-2

curs.3

‘‘(iii) INTEREST RATE USED.—The4

rate of interest used to determine current5

liability under this paragraph shall be the6

rate of interest determined under subpara-7

graph (E).8

‘‘(iv) MORTALITY TABLES.—9

‘‘(I) COMMISSIONERS’ STANDARD10

TABLE.—In the case of plan years be-11

ginning before the first plan year to12

which the first tables prescribed under13

subclause (II) apply, the mortality14

table used in determining current li-15

ability under this paragraph shall be16

the table prescribed by the Secretary17

of the Treasury which is based on the18

prevailing commissioners’ standard19

table (described in section20

807(d)(5)(A) of the Internal Revenue21

Code of 1986) used to determine re-22

serves for group annuity contracts23

issued on January 1, 1993.24

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H.L.C.

‘‘(II) SECRETARIAL AUTHOR-1

ITY.—The Secretary of the Treasury2

may by regulation prescribe for plan3

years beginning after December 31,4

1999, mortality tables to be used in5

determining current liability under6

this subsection. Such tables shall be7

based upon the actual experience of8

pension plans and projected trends in9

such experience. In prescribing such10

tables, such Secretary shall take into11

account results of available inde-12

pendent studies of mortality of indi-13

viduals covered by pension plans.14

‘‘(v) SEPARATE MORTALITY TABLES15

FOR THE DISABLED.—Notwithstanding16

clause (iv)—17

‘‘(I) IN GENERAL.—In the case18

of plan years beginning after Decem-19

ber 31, 1995, the Secretary of the20

Treasury shall establish mortality ta-21

bles which may be used (in lieu of the22

tables under clause (iv)) to determine23

current liability under this subsection24

for individuals who are entitled to25

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196

H.L.C.

benefits under the plan on account of1

disability. Such Secretary shall estab-2

lish separate tables for individuals3

whose disabilities occur in plan years4

beginning before January 1, 1995,5

and for individuals whose disabilities6

occur in plan years beginning on or7

after such date.8

‘‘(II) SPECIAL RULE FOR DIS-9

ABILITIES OCCURRING AFTER 1994.—10

In the case of disabilities occurring in11

plan years beginning after December12

31, 1994, the tables under subclause13

(I) shall apply only with respect to in-14

dividuals described in such subclause15

who are disabled within the meaning16

of title II of the Social Security Act17

and the regulations thereunder.18

‘‘(vi) PERIODIC REVIEW.—The Sec-19

retary of the Treasury shall periodically (at20

least every 5 years) review any tables in ef-21

fect under this subparagraph and shall, to22

the extent such Secretary determines nec-23

essary, by regulation update the tables to24

reflect the actual experience of pension25

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197

H.L.C.

plans and projected trends in such experi-1

ence.2

‘‘(E) REQUIRED CHANGE OF INTEREST3

RATE.—For purposes of determining a plan’s4

current liability for purposes of this5

paragraph—6

‘‘(i) IN GENERAL.—If any rate of in-7

terest used under the plan under sub-8

section (b)(6) to determine cost is not9

within the permissible range, the plan shall10

establish a new rate of interest within the11

permissible range.12

‘‘(ii) PERMISSIBLE RANGE.—For pur-13

poses of this subparagraph—14

‘‘(I) IN GENERAL.—Except as15

provided in subclause (II), the term16

‘permissible range’ means a rate of in-17

terest which is not more than 5 per-18

cent above, and not more than 10 per-19

cent below, the weighted average of20

the rates of interest on 30-year Treas-21

ury securities during the 4-year period22

ending on the last day before the be-23

ginning of the plan year.24

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H.L.C.


ITY.—If the Secretary of the Treasury2

finds that the lowest rate of interest3

permissible under subclause (I) is un-4

reasonably high, such Secretary may5

prescribe a lower rate of interest, ex-6

cept that such rate may not be less7

than 80 percent of the average rate8

determined under such subclause.9

‘‘(iii) ASSUMPTIONS.—Notwith-10

standing paragraph (3)(A), the interest11

rate used under the plan shall be—12

‘‘(I) determined without taking13

into account the experience of the14

plan and reasonable expectations, but15

‘‘(II) consistent with the assump-16

tions which reflect the purchase rates17

which would be used by insurance18

companies to satisfy the liabilities19

under the plan.20

‘‘(7) ANNUAL VALUATION.—21


section, a determination of experience gains and23

losses and a valuation of the plan’s liability24

shall be made not less frequently than once25

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199

H.L.C.

every year, except that such determination shall1

be made more frequently to the extent required2

in particular cases under regulations prescribed3

by the Secretary of the Treasury.4

‘‘(B) VALUATION DATE.—5

‘‘(i) CURRENT YEAR.—Except as pro-6

vided in clause (ii), the valuation referred7

to in subparagraph (A) shall be made as of8

a date within the plan year to which the9

valuation refers or within one month prior10

to the beginning of such year.11

‘‘(ii) USE OF PRIOR YEAR VALU-12

ATION.—The valuation referred to in sub-13

paragraph (A) may be made as of a date14

within the plan year prior to the year to15

which the valuation refers if, as of such16

date, the value of the assets of the plan are17

not less than 100 percent of the plan’s cur-18

rent liability (as defined in paragraph19

(6)(D) without regard to clause (iv) there-20

of).21

‘‘(iii) ADJUSTMENTS.—Information22

under clause (ii) shall, in accordance with23

regulations, be actuarially adjusted to re-24

flect significant differences in participants.25

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200

H.L.C.

‘‘(iv) LIMITATION.—A change in fund-1

ing method to use a prior year valuation,2

as provided in clause (ii), may not be made3

unless as of the valuation date within the4

prior plan year, the value of the assets of5

the plan are not less than 125 percent of6

the plan’s current liability (as defined in7

paragraph (6)(D) without regard to clause8

(iv) thereof).9

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS10

DEEMED MADE.—For purposes of this section, any11

contributions for a plan year made by an employer12

after the last day of such plan year, but not later13

than two and one-half months after such day, shall14

be deemed to have been made on such last day. For15

purposes of this subparagraph, such two and one-16

half month period may be extended for not more17

than six months under regulations prescribed by the18

Secretary of the Treasury.19

‘‘(9) INTEREST RULE FOR WAIVERS AND EX-20

TENSIONS.—The interest rate applicable for any21

plan year for purposes of computing the amortiza-22

tion charge described in subsection (b)(2)(C) and in23

connection with an extension granted under sub-24

section (d) shall be the greater of—25

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201

H.L.C.

‘‘(A) 150 percent of the Federal mid-term1

rate (as in effect under section 1274 of the In-2

ternal Revenue Code of 1986 for the 1st month3

of such plan year), or4

‘‘(B) the rate of interest used under the5

plan for determining costs.6

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR7

MULTIEMPLOYER PLANS.—In the case of a multiemployer8

plan—9

‘‘(1) EXTENSION.—The period of years re-10

quired to amortize any unfunded liability (described11

in any clause of subsection (b)(2)(B)) of any multi-12

employer plan shall be extended by the Secretary of13

the Treasury for a period of time (not in excess of14

5 years) if it is demonstrated to such Secretary15

that—16

‘‘(A) absent the extension, the plan would17

have an accumulated funding deficiency in any18

of the next 10 plan years,19

‘‘(B) the plan sponsor has adopted a plan20

to improve the plan’s funding status, and21

‘‘(C) taking into account the extension, the22

plan is projected to have sufficient assets to23

timely pay its expected benefit liabilities and24

other anticipated expenditures.25

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202

H.L.C.

‘‘(2) ADDITIONAL EXTENSION.—The period of1

years required to amortize any unfunded liability2

(described in any clause of subsection (b)(2)(B)) of3

any multiemployer plan may be extended (in addi-4

tion to any extension under paragraph (1)) by the5

Secretary of the Treasury for a period of time (not6

in excess of 5 years) if such Secretary determines7

that such extension would carry out the purposes of8

this Act and would provide adequate protection for9

participants under the plan and their beneficiaries10

and if such Secretary determines that the failure to11

permit such extension would—12

‘‘(A) result in—13

‘‘(i) a substantial risk to the voluntary14

continuation of the plan, or15

‘‘(ii) a substantial curtailment of pen-16

sion benefit levels or employee compensa-17

tion, and18

‘‘(B) be adverse to the interests of plan19

participants in the aggregate.20


‘‘(A) IN GENERAL.—The Secretary of the22

Treasury shall, before granting an extension23

under this section, require each applicant to24

provide evidence satisfactory to such Secretary25

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203

H.L.C.

that the applicant has provided notice of the fil-1

ing of the application for such extension to each2

affected party (as defined in section3

4001(a)(21)) with respect to the affected plan.4

Such notice shall include a description of the5

extent to which the plan is funded for benefits6

which are guaranteed under title IV and for7

benefit liabilities.8


FORMATION.—The Secretary of the Treasury10

shall consider any relevant information provided11

by a person to whom notice was given under12

paragraph (1).’’.13

(b) CONFORMING AMENDMENTS.—14

(1) Section 301 of such Act (29 U.S.C. 1081)15

is amended by striking subsection (d).16

(2) The table of contents in section 1 of such17

Act (as amended by section 102 of this Act) is18

amended further by inserting after the item relating19

to section 303 the following new item:20

‘‘Sec. 304. Minimum funding standards for multiemployer plans.’’.



cember 31, 2006.23

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204

H.L.C.

SEC. 202. ADDITIONAL FUNDING RULES FOR MULTIEM-1

PLOYER PLANS IN ENDANGERED OR CRIT-2

ICAL STATUS.3



amended by the preceding provisions of this Act) is6

amended further by inserting after section 304 the fol-7

lowing new section:8

‘‘ADDITIONAL FUNDING RULES FOR MULTIEMPLOYER9

PLANS IN ENDANGERED STATUS OR CRITICAL STATUS10

‘‘SEC. 305. (a) ANNUAL CERTIFICATION BY PLAN11

ACTUARY.—12

‘‘(1) IN GENERAL.—During the 90-day period13

beginning on first day of each plan year of a multi-14

employer plan, the plan actuary shall certify to the15

Secretary of the Treasury whether or not the plan16

is in endangered status for such plan year and17

whether or not the plan is in critical status for such18

plan year.19

‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS AND20

LIABILITIES.—21

‘‘(A) IN GENERAL.—In making the deter-22

minations under paragraph (1), the plan actu-23

ary shall make projections under subsections24

(b)(2) and (c)(2) for the current and succeeding25

plan years, using reasonable actuarial assump-26

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205

H.L.C.

tions and methods, of the current value of the1

assets of the plan and the present value of all2

liabilities to participants and beneficiaries under3

the plan for the current plan year as of the be-4

ginning of such year, as based on the actuarial5

statement prepared for the preceding plan year6

under section 103(d).7

‘‘(B) DETERMINATIONS OF FUTURE CON-8

TRIBUTIONS.—Any such actuarial projection of9

plan assets shall assume—10

‘‘(i) reasonably anticipated employer11

and employee contributions for the current12

and succeeding plan years, assuming that13

the terms of the one or more collective bar-14

gaining agreements pursuant to which the15

plan is maintained for the current plan16

year continue in effect for succeeding plan17

years, or18

‘‘(ii) that employer and employee con-19

tributions for the most recent plan year20

will continue indefinitely, but only if the21

plan actuary determines there have been22

no significant demographic changes that23

would make continued application of such24

terms unreasonable.25

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206

H.L.C.

‘‘(3) PRESUMED STATUS IN ABSENCE OF TIME-1

LY ACTUARIAL CERTIFICATION.—If certification2

under this subsection is not made before the end of3

the 90-day period specified in paragraph (1), the4

plan shall be presumed to be in critical status for5

such plan year until such time as the plan actuary6

makes a contrary certification.7

‘‘(4) NOTICE.—In any case in which a multiem-8

ployer plan is certified to be in endangered status9

under paragraph (1) or enters into critical status,10

the plan sponsor shall, not later than 30 days after11

the date of the certification or entry, provide notifi-12

cation of the endangered or critical status to the13

participants and beneficiaries, the bargaining par-14

ties, the Pension Benefit Guaranty Corporation, the15

Secretary of the Treasury, and the Secretary of16

Labor.17

‘‘(b) FUNDING RULES FOR MULTIEMPLOYER PLANS18

IN ENDANGERED STATUS.—19

‘‘(1) IN GENERAL.—In any case in which a20

multiemployer plan is in endangered status for a21

plan year and no funding improvement plan under22

this subsection with respect to such multiemployer23

plan is in effect for the plan year, the plan sponsor24

shall, in accordance with this subsection, amend the25

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207

H.L.C.

multiemployer plan to include a funding improve-1

ment plan upon approval thereof by the bargaining2

parties under this subsection. The amendment shall3

be adopted not later than 240 days after the date4

on which the plan is certified to be in endangered5

status under subsection (a)(1).6

‘‘(2) ENDANGERED STATUS.—A multiemployer7

plan is in endangered status for a plan year if, as8

determined by the plan actuary under subsection9

(a)—10

‘‘(A) the plan’s funded percentage for such11

plan year is less than 80 percent, or12

‘‘(B) the plan has an accumulated funding13

deficiency for such plan year under section 30414

or is projected to have such an accumulated15

funding deficiency for any of the 6 succeeding16

plan years, taking into account any extension of17

amortization periods under section 304(d).18

‘‘(3) FUNDING IMPROVEMENT PLAN.—19

‘‘(A) BENCHMARKS.—A funding improve-20

ment plan shall consist of amendments to the21

plan formulated to provide, under reasonable22

actuarial assumptions, for the attainment, dur-23

ing the funding improvement period under the24

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208

H.L.C.

funding improvement plan, of the following1

benchmarks:2

‘‘(i) INCREASE IN FUNDED PERCENT-3

AGE.—An increase in the plan’s funded4

percentage such that—5

‘‘(I) the difference between 1006

percent and the plan’s funded per-7

centage for the last year of the fund-8

ing improvement period, is not more9

than10

‘‘(II) 2⁄3 of the difference between11

100 percent and the plan’s funded12

percentage for the first year of the13

funding improvement period.14

‘‘(ii) AVOIDANCE OF ACCUMULATED15

FUNDING DEFICIENCIES.—No accumulated16

funding deficiency for any plan year during17

the funding improvement period (taking18

into account any extension of amortization19

periods under section 304(d)).20

‘‘(B) FUNDING IMPROVEMENT PERIOD.—21

The funding improvement period for any fund-22

ing improvement plan adopted pursuant to this23

subsection is the 10-year period beginning on24

the earlier of—25

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209

H.L.C.

‘‘(i) the second anniversary of the1

date of the adoption of the funding im-2

provement plan, or3

‘‘(ii) the first day of the first plan4

year of the multiemployer plan following5

the plan year in which occurs the first date6

after the day of the certification as of7

which collective bargaining agreements cov-8

ering on the day of such certification at9

least 75 percent of active participants in10

such multiemployer plan have expired.11

‘‘(C) SPECIAL RULES FOR CERTAIN SERI-12

OUSLY UNDERFUNDED PLANS.—13

‘‘(i) In the case of a plan in which the14

funded percentage of a plan for the plan15

year is 70 percent or less, subparagraph16

(A)(i)(II) shall be applied by substituting17

‘4⁄5’ for ‘2⁄3’ and subparagraph (B) shall be18

applied by substituting ‘the 15-year period’19

for ‘the 10-year period’.20

‘‘(ii) In the case of a plan in which21

the funded percentage of a plan for the22

plan year is more than 70 percent but less23

than 80 percent, and—24

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210

H.L.C.

‘‘(I) the plan actuary certifies1

within 30 days after certification2

under subsection (a)(1) that the plan3

is not able to attain the increase de-4

scribed in subparagraph (A)(i) over5

the period described in subparagraph6

(B), and7

‘‘(II) the plan year is prior to the8

day described in subparagraph (B)(ii),9

subparagraph (A)(i)(II) shall be applied by10

substituting ‘4⁄5’ for ‘2⁄3’ and subparagraph11

(B) shall be applied by substituting ‘the12

15-year period’ for ‘the 10-year period’.13

‘‘(iii) For any plan year following the14

year described in clause (ii)(II), subpara-15

graph (A)(i)(II) and subparagraph (B)16

shall apply, except that for each plan year17

ending after such date for which the plan18

actuary certifies (at the time of the annual19

certification under subsection (a)(1) for20

such plan year) that the plan is not able21

to attain the increase described in subpara-22

graph (A)(i) over the period described in23

subparagraph (B), subparagraph (B) shall24

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211

H.L.C.

be applied by substituting ‘the 15-year pe-1

riod’ for ‘the 10-year period’.2

‘‘(D) REPORTING.—A summary of any3

funding improvement plan or modification4

thereto adopted during any plan year, together5

with annual updates regarding the funding6

ratio of the plan, shall be included in the an-7

nual report for such plan year under section8

104(a) and in the summary annual report de-9

scribed in section 104(b)(3).10

‘‘(4) DEVELOPMENT OF FUNDING IMPROVE-11

MENT PLAN.—12

‘‘(A) ACTIONS BY PLAN SPONSOR PENDING13

APPROVAL.—Pending the approval of a funding14

improvement plan under this paragraph, the15

plan sponsor shall take all reasonable actions,16

consistent with the terms of the plan and appli-17

cable law, necessary to ensure—18

‘‘(i) an increase in the plan’s funded19

percentage, and20

‘‘(ii) postponement of an accumulated21

funding deficiency for at least 1 additional22

plan year.23

Such actions include applications for extensions24

of amortization periods under section 304(d),25

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212

H.L.C.

use of the shortfall funding method in making1

funding standard account computations,2

amendments to the plan’s benefit structure, re-3

ductions in future benefit accruals, and other4

reasonable actions consistent with the terms of5

the plan and applicable law.6

‘‘(B) RECOMMENDATIONS BY PLAN SPON-7

SOR.—8

‘‘(i) IN GENERAL.—During the period9

of 90 days following the date on which a10

multiemployer plan is certified to be in en-11

dangered status, the plan sponsor shall de-12

velop and provide to the bargaining parties13

alternative proposals for revised benefit14

structures, contribution structures, or15

both, which, if adopted as amendments to16

the plan, may be reasonably expected to17

meet the benchmarks described in para-18

graph (3)(A). Such proposals shall19

include—20

‘‘(I) at least one proposal for re-21

ductions in the amount of future ben-22

efit accruals necessary to achieve the23

benchmarks, assuming no amend-24

ments increasing contributions under25

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213

H.L.C.

the plan (other than amendments in-1

creasing contributions necessary to2

achieve the benchmarks after amend-3

ments have reduced future benefit ac-4

cruals to the maximum extent per-5

mitted by law), and6

‘‘(II) at least one proposal for in-7

creases in contributions under the8

plan necessary to achieve the bench-9

marks, assuming no amendments re-10

ducing future benefit accruals under11

the plan.12

‘‘(ii) REQUESTS BY BARGAINING PAR-13

TIES.—Upon the request of any bargaining14

party who—15

‘‘(I) employs at least 5 percent of16

the active participants, or17

‘‘(II) represents as an employee18

organization, for purposes of collective19

bargaining, at least 5 percent of the20

active participants,21

the plan sponsor shall provide all such par-22

ties information as to other combinations23

of increases in contributions and reduc-24

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214

H.L.C.

tions in future benefit accruals which1

would result in achieving the benchmarks.2

‘‘(iii) OTHER INFORMATION.—The3

plan sponsor may, as it deems appropriate,4

prepare and provide the bargaining parties5

with additional information relating to con-6

tribution structures or benefit structures7

or other information relevant to the fund-8

ing improvement plan.9

‘‘(5) MAINTENANCE OF CONTRIBUTIONS PEND-10

ING APPROVAL OF FUNDING IMPROVEMENT PLAN.—11

Pending approval of a funding improvement plan by12

the bargaining parties with respect to a multiem-13

ployer plan, the multiemployer plan may not be14

amended so as to provide—15

‘‘(A) a reduction in the level of contribu-16

tions for participants who are not in pay status,17

‘‘(B) a suspension of contributions with re-18

spect to any period of service, or19

‘‘(C) any new direct or indirect exclusion20

of younger or newly hired employees from plan21

participation.22

‘‘(6) BENEFIT RESTRICTIONS PENDING AP-23

PROVAL OF FUNDING IMPROVEMENT PLAN.—Pend-24

ing approval of a funding improvement plan by the25

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215

H.L.C.

bargaining parties with respect to a multiemployer1

plan—2

‘‘(A) RESTRICTIONS ON LUMP SUM AND3

SIMILAR DISTRIBUTIONS.—In any case in which4

the present value of a participant’s accrued5

benefit under the plan exceeds $5,000, such6

benefit may not be distributed as an immediate7

distribution or in any other accelerated form.8

‘‘(B) PROHIBITION ON BENEFIT IN-9

CREASES.—10

‘‘(i) IN GENERAL.—No amendment of11

the plan which increases the liabilities of12

the plan by reason of any increase in bene-13

fits, any change in the accrual of benefits,14

or any change in the rate at which benefits15

become nonforfeitable under the plan may16

be adopted.17

‘‘(ii) EXCEPTION.—Clause (i) shall18

not apply to any plan amendment which is19

required as a condition of qualification20

under part I of subchapter D of chapter 121

of subtitle A of the Internal Revenue Code22

of 1986.23

‘‘(7) DEFAULT CRITICAL STATUS IF NO FUND-24

ING IMPROVEMENT PLAN ADOPTED.—If no plan25

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216

H.L.C.

amendment adopting a funding improvement plan1

has been adopted by the end of the 240-day period2

referred to in subsection (b)(1), the plan enters into3

critical status as of the first day of the succeeding4

plan year.5

‘‘(8) RESTRICTIONS UPON APPROVAL OF FUND-6

ING IMPROVEMENT PLAN.—Upon adoption of a7

funding improvement plan with respect to a multi-8

employer plan, the plan may not be amended—9

‘‘(A) so as to be inconsistent with the10

funding improvement plan, or11

‘‘(B) so as to increase future benefit accru-12

als, unless the plan actuary certifies in advance13

that, after taking into account the proposed in-14

crease, the plan is reasonably expected to meet15

the the benchmarks described in paragraph16

(3)(A).17

‘‘(c) FUNDING RULES FOR MULTIEMPLOYER PLANS18

IN CRITICAL STATUS.—19


multiemployer plan is in critical status for a plan21

year as described in paragraph (2) (or otherwise en-22

ters into critical status under this section) and no23

rehabilitation plan under this subsection with respect24

to such multiemployer plan is in effect for the plan25

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217

H.L.C.

year, the plan sponsor shall, in accordance with this1

subsection, amend the multiemployer plan to include2

a rehabilitation plan under this subsection. The3

amendment shall be adopted not later than 240 days4

after the date on which the plan enters into critical5

status.6

‘‘(2) CRITICAL STATUS.—A multiemployer plan7

is in critical status for a plan year if—8

‘‘(A) the plan is in endangered status for9

the preceding plan year and the requirements of10

subsection (b)(1) were not met with respect to11

the plan for such preceding plan year, or12

‘‘(B) as determined by the plan actuary13

under subsection (a), the plan is described in14

paragraph (3).15

‘‘(3) CRITICALITY DESCRIPTION.—For purposes16

of paragraph (2)(B), a plan is described in this17

paragraph if the plan is described in at least one of18

the following subparagraphs:19

‘‘(A) A plan is described in this subpara-20

graph if, as of the beginning of the current plan21

year—22

‘‘(i) the funded percentage of the plan23

is less than 65 percent, and24

‘‘(ii) the sum of—25

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218

H.L.C.

‘‘(I) the market value of plan as-1

sets, plus2

‘‘(II) the present value of the3

reasonably anticipated employer and4

employee contributions for the current5

plan year and each of the 6 suc-6

ceeding plan years, assuming that the7

terms of the one or more collective8

bargaining agreements pursuant to9

which the plan is maintained for the10

current plan year continue in effect11

for succeeding plan years,12

is less than the present value of all non-13

forfeitable benefits for all participants and14

beneficiaries projected to be payable under15

the plan during the current plan year and16

each of the 6 succeeding plan years (plus17

administrative expenses for such plan18

years).19

‘‘(B) A plan is described in this subpara-20


year, the sum of—22

‘‘(i) the market value of plan assets,23

plus24

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219

H.L.C.

‘‘(ii) the present value of the reason-1

ably anticipated employer and employee2

contributions for the current plan year and3

each of the 4 succeeding plan years, as-4

suming that the terms of the one or more5

collective bargaining agreements pursuant6

to which the plan is maintained for the7

current plan year remain in effect for suc-8

ceeding plan years,9

is less than the present value of all nonforfeit-10

able benefits for all participants and bene-11

ficiaries projected to be payable under the plan12

during the current plan year and each of the 413

succeeding plan years (plus administrative ex-14

penses for such plan years).15

‘‘(C) A plan is described in this subpara-16

graph if—17

‘‘(i) as of the beginning of the current18

plan year, the funded percentage of the19

plan is less than 65 percent, and20

‘‘(ii) the plan has an accumulated21

funding deficiency for the current plan22

year or is projected to have an accumu-23

lated funding deficiency for any of the 424

succeeding plan years, not taking into ac-25

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220

H.L.C.

count any extension of amortization peri-1

ods under section 304(d).2

‘‘(D) A plan is described in this subpara-3

graph if—4

‘‘(i)(I) the plan’s normal cost for the5

current plan year, plus interest (deter-6

mined at the rate used for determining7

cost under the plan) for the current plan8

year on the amount of unfunded benefit li-9

abilities under the plan as of the last date10

of the preceding plan year, exceeds11

‘‘(II) the present value, as of the be-12

ginning of the current plan year, of the13

reasonably anticipated employer and em-14

ployee contributions for the current plan15

year,16

‘‘(ii) the present value, as of the be-17

ginning of the current plan year, of non-18

forfeitable benefits of inactive participants19

is greater than the present value, as of the20

beginning of the current plan year, of non-21

forfeitable benefits of active participants,22

and23

‘‘(iii) the plan is projected to have an24

accumulated funding deficiency for the25

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H.L.C.

current plan year or any of the 4 suc-1

ceeding plan years, not taking into account2

any extension of amortization periods3


‘‘(E) A plan is described in this subpara-5

graph if—6


is greater than 65 percent for the current8

plan year, and9

‘‘(ii) the plan is projected to have an10

accumulated funding deficiency during any11

of the succeeding 3 plan years, not taking12


periods under section 304(d).14

‘‘(4) REHABILITATION PLAN.—15

‘‘(A) IN GENERAL.—A rehabilitation plan16

shall consist of—17

‘‘(i) amendments to the plan providing18

(under reasonable actuarial assumptions)19

for measures, agreed to by the bargaining20

parties, to increase contributions, reduce21

plan expenditures (including plan mergers22

and consolidations), or reduce future ben-23

efit accruals, or to take any combination of24

such actions, determined necessary to25

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cause the plan to cease, during the reha-1

bilitation period, to be in critical status, or2

‘‘(ii) reasonable measures to forestall3

possible insolvency (within the meaning of4

section 4245) if the plan sponsor deter-5

mines that, upon exhaustion of all reason-6

able measures, the plan would not cease7

during the rehabilitation period to be in8

critical status.9

A rehabilitation must provide annual standards10

for meeting the requirements of such rehabilita-11

tion plan.12

‘‘(B) REHABILITATION PERIOD.—The re-13

habilitation period for any rehabilitation plan14

adopted pursuant to this subsection is the 10-15

year period beginning on the earlier of—16


date of the adoption of the rehabilitation18

plan, or19



the plan year in which occurs the first22

date, after the date of the plan’s entry into23

critical status, as of which collective bar-24

gaining agreements covering at least 7525

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H.L.C.

percent of active participants in such mul-1

tiemployer plan (determined as of such2

date of entry) have expired.3

‘‘(C) REPORTING.—A summary of any re-4

habilitation plan or modification thereto adopt-5

ed during any plan year, together with annual6

updates regarding the funding ratio of the plan,7

shall be included in the annual report for such8

plan year under section 104(a) and in the sum-9

mary annual report described in section10

104(b)(3).11

‘‘(5) DEVELOPMENT OF REHABILITATION12

PLAN.—13

‘‘(A) PROPOSALS BY PLAN SPONSOR.—14

‘‘(i) IN GENERAL.—Within 90 days15

after the date of entry into critical status16

(or the date as of which the requirements17

of subsection (b)(1) are not met with re-18

spect to the plan), the plan sponsor shall19

propose to all bargaining parties a range of20

alternative schedules of increases in con-21

tributions and reductions in future benefit22

accruals that would serve to carry out a re-23

habilitation plan under this subsection.24

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H.L.C.

‘‘(ii) PROPOSAL ASSUMING NO CON-1

TRIBUTION INCREASES.—Such proposals2

shall include, as one of the proposed sched-3

ules, a schedule of those reductions in fu-4

ture benefit accruals that would be nec-5

essary to cause the plan to cease to be in6

critical status if there were no further in-7

creases in rates of contribution to the plan.8

‘‘(iii) PROPOSAL WHERE CONTRIBU-9

TIONS ARE NECESSARY.—If the plan spon-10

sor determines that the plan will not cease11

to be in critical status during the rehabili-12

tation period unless the plan is amended to13

provide for an increase in contributions,14

the plan sponsor’s proposals shall include a15

schedule of those increases in contribution16

rates that would be necessary to cause the17

plan to cease to be in critical status if fu-18

ture benefit accruals were reduced to the19

maximum extent permitted by law.20

‘‘(B) REQUESTS FOR ADDITIONAL SCHED-21

ULES.—Upon the request of any bargaining22

party who—23

‘‘(i) employs at least 5 percent of the24

active participants, or25

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H.L.C.

‘‘(ii) represents as an employee orga-1

nization, for purposes of collective bar-2

gaining, at least 5 percent of active partici-3

pants,4

the plan sponsor shall include among the pro-5

posed schedules such schedules of increases in6

contributions and reductions in future benefit7

accruals as may be specified by the bargaining8

parties.9

‘‘(C) SUBSEQUENT AMENDMENTS.—Upon10

the adoption of a schedule of increases in con-11

tributions or reductions in future benefit accru-12

als as part of the rehabilitation plan, the plan13

sponsor may amend the plan thereafter to up-14

date the schedule to adjust for any experience15

of the plan contrary to past actuarial assump-16

tions, except that such an amendment may be17

made not more than once in any 3-year period.18

‘‘(D) ALLOCATION OF REDUCTIONS IN FU-19

TURE BENEFIT ACCRUALS.—Any schedule con-20

taining reductions in future benefit accruals21

forming a part of a rehabilitation plan shall be22

applicable with respect to any group of active23

participants who are employed by any bar-24

gaining party (as an employer obligated to con-25

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H.L.C.

tribute under the plan) in proportion to the ex-1

tent to which increases in contributions under2

such schedule apply to such bargaining party.3

‘‘(E) LIMITATION ON REDUCTION IN4

RATES OF FUTURE ACCRUALS.—Any schedule5

proposed under this paragraph shall not reduce6

the rate of future accruals below the lower of—7

‘‘(i) a monthly benefit equal to 1 per-8

cent of the contributions required to be9

made with respect to a participant or the10

equivalent standard accrual rate for a par-11

ticipant or group of participants under the12

collective bargaining agreements in effect13

as of the first day of the plan year in14

which the plan enters critical status, or15

‘‘(ii) if lower, the accrual rate under16

the plan on such date.17

The equivalent standard accrual rate shall be18

determined by the trustees based on the stand-19

ard or average contribution base units that they20

determine to be representative for active partici-21

pants and such other factors as they determine22

to be relevant.23

‘‘(F) PROTECTION OF RESTORED RATES24

OF ACCRUAL.—25

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H.L.C.

‘‘(i) IN GENERAL.—Any schedule pro-1

posed under this paragraph shall not re-2

duce the rate of future accruals below any3

restored accrual rate.4

‘‘(ii) RESTORED ACCRUAL RATE.—For5

purposes of clause (i), the term ‘restored6

accrual rate’ means a rate of benefit accru-7

als which was reduced and subsequently8

restored before entry of the plan into crit-9

ical status.10

‘‘(6) MAINTENANCE OF CONTRIBUTIONS AND11

RESTRICTIONS ON BENEFITS PENDING ADOPTION OF12

REHABILITATION PLAN.—The rules of paragraphs13

(5) and (6) of subsection (b) shall apply for pur-14

poses of this subsection by substituting the term ‘re-15

habilitation plan’ for ‘funding improvement plan’.16

‘‘(7) SPECIAL RULES.—17

‘‘(A) AUTOMATIC EMPLOYER SUR-18

CHARGE.—19

‘‘(i) 5 PERCENT AND 10 PERCENT20

SURCHARGE.—For the first plan year in21

which the plan is in critical status, each22

employer otherwise obligated to make a23

contribution for that plan year shall be ob-24

ligated to pay to the plan a surcharge25

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H.L.C.

equal to 5 percent of the contribution oth-1

erwise required under the respective collec-2

tive bargaining agreement (or other agree-3

ment pursuant to which the employer con-4

tributes). For each consecutive plan year5

thereafter in which the plan is in critical6

status, the surcharge shall be 10 percent of7

the contribution otherwise required under8

the respective collective bargaining agree-9

ment (or other agreement pursuant to10

which the employer contributes).11

‘‘(ii) ENFORCEMENT OF SUR-12

CHARGE.—The surcharges under clause (i)13

shall be due and payable on the same14

schedule as the contributions on which15

they are based. Any failure to make a sur-16

charge payment shall be treated as a delin-17

quent contribution under section 515 and18

shall be enforceable as such.19

‘‘(iii) SURCHARGE TO TERMINATE20

UPON CBA RENEGOTIATION.—The sur-21

charge under this paragraph shall cease to22

be effective with respect to employees cov-23

ered by a collective bargaining agreement,24

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229

H.L.C.

beginning on the date on which that agree-1

ment is renegotiated to include—2

‘‘(I) a schedule of benefits and3

contributions published by the trust-4

ees pursuant to the plan’s rehabilita-5

tion plan, or6

‘‘(II) otherwise collectively bar-7

gained benefit changes.8

‘‘(iv) SURCHARGE NOT TO APPLY9

UNTIL EMPLOYER RECEIVES 30-DAY NO-10

TICE.—The surcharge under this subpara-11

graph shall not apply to an employer until12

30 days after the employer has been noti-13

fied by the trustees that the plan is in crit-14

ical status and that the surcharge is in ef-15

fect.16

‘‘(v) SURCHARGE NOT TO GENERATE17

INCREASED BENEFIT ACCRUALS.—Not-18

withstanding any provision of a plan to the19

contrary, the amount of any surcharge20

shall not be the basis for any benefit ac-21

cruals under the plan.22

‘‘(B) BENEFIT ADJUSTMENTS.—23

‘‘(i) IN GENERAL.—The trustees shall24

make appropriate reductions, if any, to ad-25

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230

H.L.C.

justable benefits based upon the outcome1

of collective bargaining over the schedules2

provided under paragraph (5).3

‘‘(ii) RETIREE PROTECTION.—Except4

as provided in subparagraph (C), the trust-5

ees of a plan in critical status may not re-6

duce adjustable benefits of any participant7

or beneficiary who was in pay status at8

least one year before the first day of the9

first plan year in which the plan enters10

into critical status.11

‘‘(iii) TRUSTEE FLEXIBILITY.—The12

trustees shall include in the schedules pro-13

vided to the bargaining parties an allow-14

ance for funding the benefits of partici-15

pants with respect to whom contributions16

are not currently required to be made, and17

shall reduce their benefits to the extent18

permitted under this title and considered19

appropriate based on the plan’s then cur-20

rent overall funding status and its future21

prospects in light of the results of the par-22

ties’ negotiations.23

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H.L.C.

‘‘(C) ADJUSTABLE BENEFIT DEFINED.—1

For purposes of this paragraph, the term ‘ad-2

justable benefit’ means—3

‘‘(i) benefits, rights, and features,4

such as post-retirement death benefits, 60-5

month guarantees, disability benefits not6

yet in pay status, and similar benefits,7

‘‘(ii) retirement-type subsidies, early8

retirement benefits, and benefit payment9

options (other than the 50 percent quali-10

fied joint-and-survivor benefit and single11

life annuity), and12

‘‘(iii) benefit increases that would not13

be eligible for a guarantee under section14

4022A on the first day of the plan year in15

which the plan enters into critical status16

because they were adopted, or if later, took17

effect less than 60 months before reorga-18

nization.19

‘‘(D) NORMAL RETIREMENT BENEFITS20

PROTECTED.—Nothing in this paragraph shall21

be construed to permit a plan to reduce the22

level of a participant’s accrued benefit payable23

at normal retirement age which is not an ad-24

justable benefit.25

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232

H.L.C.

‘‘(E) ADJUSTMENTS DISREGARDED IN1

WITHDRAWAL LIABILITY DETERMINATION.—2

‘‘(i) BENEFIT REDUCTIONS.—Any3

benefit reductions under this paragraph4

shall be disregarded in determining a5

plan’s unfunded vested benefits for pur-6

poses of determining an employer’s with-7

drawal liability under section 4201.8

‘‘(ii) SURCHARGES.—Any surcharges9

under this paragraph shall be disregarded10

in determining an employer’s withdrawal11

liability under section 4211, except for12

purposes of determining the unfunded vest-13

ed benefits attributable to an employer or14

under a modified attributable method15

adopted with the approval of the Pension16

Benefit Guaranty Corporation under sub-17

section (c)(5) of that section.18

‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA-19

BILITATION PLAN.—Upon adoption of a rehabilita-20

tion plan with respect to a multiemployer plan, the21

plan may not be amended—22

‘‘(A) so as to be inconsistent with the re-23

habilitation plan, or24

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233

H.L.C.




crease, the plan is reasonably expected to cease4

to be in critical status.5

‘‘(9) IMPLEMENTATION OF DEFAULT SCHED-6

ULE UPON FAILURE TO ADOPT REHABILITATION7

PLAN.—If the plan is not amended by the end of the8

240-day period after entry into critical status to in-9

clude a rehabilitation plan, the plan sponsor shall10

amend the plan to implement the schedule required11

by paragraph (5)(A)(ii).12

‘‘(10) DEEMED WITHDRAWAL.—Upon the fail-13

ure of any employer who has an obligation to con-14

tribute under the plan to make contributions in com-15

pliance with the schedule adopted under paragraph16

(4) as part of the rehabilitation plan, the failure of17

the employer may, at the discretion of the plan spon-18

sor, be treated as a withdrawal by the employer from19

the plan under section 4203 or a partial withdrawal20

by the employer under section 4205.21

‘‘(11) SPECIAL RULE FOR PLAN AMEND-22

MENTS.—A multiemployer plan in critical status23

shall not fail to meet the requirements of section24

204(g) or section 411(d)(6) of the Internal Revenue25

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234

H.L.C.

Code of 1986 solely by reason of the adoption by the1

plan of an amendment necessary to meet the re-2

quirements of this subsection.3

‘‘(d) DEFINITIONS.—For purposes of this section—4

‘‘(1) BARGAINING PARTY.—The term ‘bar-5

gaining party’ means, in connection with a multiem-6

ployer plan—7

‘‘(A) an employer who has an obligation to8

contribute under the plan, and9

‘‘(B) an employee organization which, for10

purposes of collective bargaining, represents11

plan participants employed by such an em-12

ployer.13

‘‘(2) FUNDED PERCENTAGE.—The term ‘fund-14

ed percentage’ means the percentage expressed as a15

ratio of which—16

‘‘(A) the numerator of which is the value17

of the plan’s assets, as determined under sec-18

tion 304(c)(2), and19

‘‘(B) the denominator of which is the ac-20

crued liability of the plan.21

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—22

The term ‘accumulated funding deficiency’ has the23

meaning provided such term in section 304(a).24

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H.L.C.

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active1

participant’ means, in connection with a multiem-2

ployer plan, a participant who is in covered service3

under the plan.4

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac-5

tive participant’ means, in connection with a multi-6

employer plan, a participant who—7

‘‘(A) is not in covered service under the8

plan, and9

‘‘(B) is in pay status under the plan or has10

a nonforfeitable right to benefits under the11

plan.12

‘‘(6) PAY STATUS.—A person is in ‘pay status’13

under a multiemployer plan if—14

‘‘(A) at any time during the current plan15

year, such person is a participant or beneficiary16

under the plan and is paid an early, late, nor-17

mal, or disability retirement benefit under the18

plan (or a death benefit under the plan related19

to a retirement benefit), or20

‘‘(B) to the extent provided in regulations21

of the Secretary of the Treasury, such person22

is entitled to such a benefit under the plan.23

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H.L.C.

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term1

‘obligation to contribute’ has the meaning provided2

such term under section 4212(a).3

‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan4

shall be treated as entering into critical status as of5

the date that such plan is certified to be in critical6

status under subsection (a)(1), is presumed to be in7

critical status under subsection (a)(3), or enters into8

critical status under subsection (b)(7).’’.9

(b) ENFORCEMENT.—Section 502 of the Employee10

Retirement Income Security Act of 1974 (29 U.S.C. 1132)11

is amended—12

(1) in subsection (a)(6) by striking ‘‘(6), or13

(7)’’ and inserting ‘‘(6), (7), or (8)’’;14

(2) by redesignating subsection (c)(8) as sub-15

section (c)(9); and16

(3) by inserting after subsection (c)(7) the fol-17

lowing new paragraph:18

‘‘(8) The Secretary may assess a civil penalty19

against—20

‘‘(A) any person of not more than $1,10021

per day for each violation by such person of22

subsection (a)(1), (b)(1), or (c)(1) of section23

305, or24

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237

H.L.C.

‘‘(B) any plan sponsor for failure by the1

plan sponsor to implement the terms of any2

funding improvement plan or rehabilitation plan3

adopted under section 305.’’.4

(c) CONFORMING AMENDMENT.—The table of con-5

tents in section 1 of such Act (as amended by the pre-6

ceding provisions of this Act) is amended further by in-7

serting after the item relating to section 304 the following8

new item:9

‘‘Sec. 305. Additional funding rules for multiemployer plans in endangered sta-

tus or critical status.’’.



ning after 2005.12

(e) SPECIAL RULE FOR 2006.—In the case of any13

plan year beginning in 2006, any reference in section 30514

of the Employee Retirement Income Security Act of 197415

(as added by this section) to section 304 of such Act (as16

added by this Act) shall be treated as a reference to the17

corresponding provision of the Employee Retirement In-18

come Security Act of 1974 as in effect for plan years be-19

ginning in such year.20

SEC. 203. MEASURES TO FORESTALL INSOLVENCY OF MUL-21

TIEMPLOYER PLANS.22

(a) ADVANCE DETERMINATION OF IMPENDING IN-23

SOLVENCY OVER 5 YEARS.—Section 4245(d)(1) of the24

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238

H.L.C.


U.S.C. 1426(d)(1)) is amended—2

(1) by striking ‘‘3 plan years’’ the second place3

it appears and inserting ‘‘5 plan years’’; and4

(2) by adding at the end the following new sen-5

tence: ‘‘If the plan sponsor makes such a determina-6

tion that the plan will be insolvent in any of the next7

5 plan years, the plan sponsor shall make the com-8

parison under this paragraph at least annually until9

the plan sponsor makes a determination that the10

plan will not be insolvent in any of the next 5 plan11

years.’’.12


this section shall apply with respect to determinations14

made in plan years beginning after December 31, 2005.15

SEC. 204. WITHDRAWAL LIABILITY REFORMS.16

(a) REPEAL OF LIMITATION ON WITHDRAWAL LI-17

ABILITY IN THE EVENT OF CERTAIN SALES OF EM-18

PLOYER ASSETS TO UNRELATED PARTIES.—19

(1) IN GENERAL.—Section 4225 of the Em-20

ployee Retirement Income Security Act of 1974 (2921

U.S.C. 1405) is repealed.22

(2) CONFORMING AMENDMENT.—The table of23

contents in section 1 of such Act is amended by24

striking the item relating to section 4225.25

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239

H.L.C.

(3) EFFECTIVE DATE.—The amendments made1

by this section shall apply with respect to sales oc-2

curring on or after January 1, 2006.3

(b) REPEAL OF LIMITATION TO 20 ANNUAL PAY-4

MENTS.—5

(1) IN GENERAL.—Section 4219(c)(1) of such6

Act (29 U.S.C. 1399(c)(1)) is amended by striking7

subparagraph (B).8


by this section shall apply with respect to with-10

drawals occurring on or after January 1, 2006.11

(c) WITHDRAWAL LIABILITY CONTINUES IF WORK12

CONTRACTED OUT.—13

(1) IN GENERAL.—Clause (i) of section14

4205(b)(2)(A) of such Act (29 U.S.C.15

1385(b)(2)(A)) is amended by inserting ‘‘or to an-16

other party or parties’’ after ‘‘to another location’’.17


by this subsection shall apply with respect to work19

transferred on or after the date of the enactment of20

this Act.21

(d) REPEAL OF SPECIAL RULE FOR LONG AND22

SHORT HAUL TRUCKING INDUSTRY.—23

(1) IN GENERAL.—Subsection (d) of section24

4203 of such Act (29 U.S.C. 1383(d)) is repealed.25

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240

H.L.C.

(2) EFFECTIVE DATE.—The repeal under this1

subsection shall apply with respect to cessations to2

have obligations to contribute to multiemployer3

plans and cessations of covered operations under4

such plans occurring on or after January 1, 2006.5

(e) APPLICATION OF FORGIVENESS RULE TO PLANS6

PRIMARILY COVERING EMPLOYEES IN THE BUILDING7

AND CONSTRUCTION.—8

(1) IN GENERAL.—Section 4210(b) of such Act9

(29 U.S.C. 1390(b)) is amended—10

(A) by striking paragraph (1); and11

(B) by redesignating paragraphs (2)12

through (4) as paragraphs (1) through (3), re-13

spectively.14

(2) EFFECTIVE DATE.—The amendments made15

by this subsection shall apply with respect to plan16

withdrawals occurring on or after January 1, 2006.17

SEC. 205. REMOVAL OF RESTRICTIONS WITH RESPECT TO18

PROCEDURES APPLICABLE TO DISPUTES IN-19

VOLVING WITHDRAWAL LIABILITY.20

(a) IN GENERAL.—Section 4221(f)(1) of the Em-21

ployee Retirement Income Security Act of 1974 (2922

U.S.C. 1401(f)(1)) is amended—23

(1) in subparagraph (A) by inserting ‘‘and’’24

after ‘‘plan,’’, and25

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241

H.L.C.

(2) by striking subparagraphs (B) and (C) and1

inserting the following new subparagraph:2

‘‘(B) such determination is based in whole3

or in part on a finding by the plan sponsor4

under section 4212(c) that a principal purpose5

of any transaction which occurred at least 56

years (2 years in the case of a small employer)7

before the date of the complete or partial with-8

drawal was to evade or avoid withdrawal liabil-9

ity under this subtitle,’’.10

(b) SMALL EMPLOYER.—Paragraph (2) of section11

4221(f) of such Act is amended by adding at the end the12

following new subparagraph:13

‘‘(C) SMALL EMPLOYER.—For purposes of14

paragraph (1)(B)—15

‘‘(i) IN GENERAL.—The term ‘small16

employer’ means any employer who (as of17

immediately before the transaction referred18

to in paragraph (1)(B))—19

‘‘(I) employs not more than 50020

employees, and21

‘‘(II) is required to make con-22

tributions to the plan for not more23

than 250 employees.24

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H.L.C.

‘‘(ii) CONTROLLED GROUP.—Any1

group treated as a single employer under2

subsection (b), (c), (m), or (o) of section3

414 of the Internal Revenue Code of 19864

shall be treated as a single employer for5

purposes of this subparagraph.’’.6

(c) ADDITIONAL AMENDMENTS.—7

(1) Subparagraph (A) of section 4221(f)(2) of8

such Act (29 U.S.C. 1401(f)(2)) is amended by9

striking ‘‘Notwithstanding’’ and inserting ‘‘In the10

case of a transaction occurring before January 1,11

1999, and at least 5 years before the date of the12

complete or partial withdrawal, notwithstanding’’.13

(2) Section 4221(f)(2)(B) of such Act (2914

U.S.C. 1401(f)(2)(B)) is amended—15

(A) by inserting ‘‘with respect to with-16

drawal liability payments’’ after ‘‘determina-17

tion’’ the first place it appears, and18

(B) by striking ‘‘any’’ and inserting ‘‘the’’.19


this section shall apply to any employer that receives a21

notification under section 4219(b)(1) of the Employee Re-22

tirement Income Security Act of 1974 on or after the date23

of the enactment of this Act.24

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Subtitle B—Amendments to1

Internal Revenue Code of 19862

SEC. 211. FUNDING RULES FOR MULTIEMPLOYER DEFINED3

BENEFIT PLANS.4

(a) IN GENERAL.—Subpart A of part III of sub-5

chapter D of chapter 1 of the Internal Revenue Code of6

1986 (added by section 112 of this Act) is amended by7

adding at the end the following new section:8

‘‘SEC. 431. MINIMUM FUNDING STANDARDS FOR MULTIEM-9

PLOYER PLANS.10

‘‘(a) IN GENERAL.—For purposes of section 412, the11

accumulated funding deficiency of a multiemployer plan12

for any plan year is—13

‘‘(1) except as provided in paragraph (2), the14

amount, determined as of the end of the plan year,15

equal to the excess (if any) of the total charges to16

the funding standard account of the plan for all plan17

years (beginning with the first plan year for which18

section 412 applies to the plan) over the total credits19

to such account for such years, and20

‘‘(2) if the multiemployer plan is in reorganiza-21

tion for any plan year, the accumulated funding de-22

ficiency of the plan determined under section 418B.23

‘‘(b) FUNDING STANDARD ACCOUNT.—24

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‘‘(1) ACCOUNT REQUIRED.—Each multiem-1

ployer plan to which section 412 applies shall estab-2

lish and maintain a funding standard account. Such3

account shall be credited and charged solely as pro-4

vided in this section.5

‘‘(2) CHARGES TO ACCOUNT.—For a plan year,6

the funding standard account shall be charged with7

the sum of—8

‘‘(A) the normal cost of the plan for the9

plan year,10

‘‘(B) the amounts necessary to amortize in11


tized)—13

‘‘(i) in the case of a plan in existence14

on January 1, 1974, the unfunded past15

service liability under the plan on the first16

day of the first plan year to which section17

412 applies, over a period of 40 plan years,18

‘‘(ii) in the case of a plan which comes19

into existence after January 1, 1974, the20

unfunded past service liability under the21

plan on the first day of the first plan year22

to which section 412 applies, over a period23

of 15 plan years,24

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H.L.C.


plan year, the net increase (if any) in un-2




‘‘(iv) separately, with respect to each6

plan year, the net experience loss (if any)7


years, and9

‘‘(v) separately, with respect to each10

plan year, the net loss (if any) resulting11



plan years,14

‘‘(C) the amount necessary to amortize15

each waived funding deficiency (within the16

meaning of section 412(c)(3)) for each prior17

plan year in equal annual installments (until18

fully amortized) over a period of 15 plan years,19

‘‘(D) the amount necessary to amortize in20


tized) over a period of 5 plan years any amount22

credited to the funding standard account under23

section 412(b)(3)(D) (as in effect on the day24

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H.L.C.

before the date of the enactment of the Pension1

Protection Act of 2005), and2

‘‘(E) the amount necessary to amortize in3


tized) over a period of 20 years the contribu-5

tions which would be required to be made under6

the plan but for the provisions of section7

412(c)(7)(A)(i)(I) (as in effect on the day be-8

fore the date of the enactment of the Pension9

Protection Act of 2005).10

‘‘(3) CREDITS TO ACCOUNT.—For a plan year,11

the funding standard account shall be credited with12

the sum of—13

‘‘(A) the amount considered contributed by14

the employer to or under the plan for the plan15

year,16

‘‘(B) the amount necessary to amortize in17


tized)—19

‘‘(i) separately, with respect to each20

plan year, the net decrease (if any) in un-21




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‘‘(ii) separately, with respect to each1

plan year, the net experience gain (if any)2


years, and4


plan year, the net gain (if any) resulting6



plan years,9

‘‘(C) the amount of the waived funding de-10

ficiency (within the meaning of section11

412(c)(3)) for the plan year, and12

‘‘(D) in the case of a plan year for which13

the accumulated funding deficiency is deter-14

mined under the funding standard account if15

such plan year follows a plan year for which16

such deficiency was determined under the alter-17

native minimum funding standard under section18

412(g) (as in effect on the day before the date19

of the enactment of the Pension Protection Act20

of 2005), the excess (if any) of any debit bal-21

ance in the funding standard account (deter-22

mined without regard to this subparagraph)23

over any debit balance in the alternative min-24

imum funding standard account.25

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H.L.C.

‘‘(4) SPECIAL RULES FOR PRE-2007 AMORTIZA-1

TIONS.—2

‘‘(A) IN GENERAL.—In the case of any3

amount amortized under section 412(b) (as in4

effect on the day before the date of the enact-5

ment of the Pension Protection Act of 2005)6

over any period beginning with a plan year be-7

ginning before 2007, in lieu of the amortization8

described in paragraphs (2)(B) and (3)(B),9

such amount shall continue to be amortized10

under such section as so in effect.11

‘‘(B) INTEREST RATE.—For purposes of12

amortizations under section 412(b) (as in effect13

on the day before the date of the enactment of14

the Pension Protection Act of 2005), in the15

case of any waiver under section 412(d) (as so16

in effect) or extension under section 412(e) (as17

so in effect) with respect to which application18

has been made before June 30, 2005, the inter-19

est rate under section 412(d)(1)(A) (as so in ef-20

fect) or section 412(e) (as so in effect), as the21

case may be, shall apply.22

‘‘(5) COMBINING AND OFFSETTING AMOUNTS23

TO BE AMORTIZED.—Under regulations prescribed24

by the Secretary, amounts required to be amortized25

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H.L.C.

under paragraph (2) or paragraph (3), as the case1

may be—2

‘‘(A) may be combined into one amount3

under such paragraph to be amortized over a4

period determined on the basis of the remaining5

amortization period for all items entering into6

such combined amount, and7

‘‘(B) may be offset against amounts re-8

quired to be amortized under the other such9

paragraph, with the resulting amount to be am-10

ortized over a period determined on the basis of11

the remaining amortization periods for all items12

entering into whichever of the two amounts13

being offset is the greater.14

‘‘(6) INTEREST.—Except as provided in sub-15

section (c)(9), the funding standard account (and16

items therein) shall be charged or credited (as deter-17

mined under regulations prescribed by the Sec-18

retary) with interest at the appropriate rate con-19

sistent with the rate or rates of interest used under20

the plan to determine costs.21

‘‘(7) CERTAIN AMORTIZATION CHARGES AND22

CREDITS.—In the case of a plan which, immediately23

before the date of the enactment of the Multiem-24

ployer Pension Plan Amendments Act of 1980, was25

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H.L.C.

a multiemployer plan (within the meaning of section1

414(f) as in effect immediately before such date)—2

‘‘(A) any amount described in paragraph3

(2)(B)(ii), (2)(B)(iii), or (3)(B)(i) of this sub-4

section which arose in a plan year beginning be-5

fore such date shall be amortized in equal an-6

nual installments (until fully amortized) over 407

plan years, beginning with the plan year in8

which the amount arose,9

‘‘(B) any amount described in paragraph10

(2)(B)(iv) or (3)(B)(ii) of this subsection which11

arose in a plan year beginning before such date12



ginning with the plan year in which the amount15

arose,16

‘‘(C) any change in past service liability17



from a plan amendment adopted before such20

date, shall be amortized in equal annual install-21

ments (until fully amortized) over 40 plan22

years, beginning with the plan year in which the23

change arises, and24

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H.L.C.

‘‘(D) any change in past service liability1



from the changing of a group of participants4

from one benefit level to another benefit level5

under a schedule of plan benefits which—6

‘‘(i) was adopted before such date,7

and8

‘‘(ii) was effective for any plan partici-9

pant before the beginning of the first plan10

year beginning on or after such date,11



ginning with the plan year in which the change14

arises.15

‘‘(8) SPECIAL RULES RELATING TO CHARGES16

AND CREDITS TO FUNDING STANDARD ACCOUNT.—17


‘‘(A) WITHDRAWAL LIABILITY.—Any19

amount received by a multiemployer plan in20

payment of all or part of an employer’s with-21

drawal liability under part 1 of subtitle E of22

title IV of the Employee Retirement Income Se-23

curity Act of 1974 shall be considered an24

amount contributed by the employer to or25

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H.L.C.

under the plan. The Secretary may prescribe by1

regulation additional charges and credits to a2

multiemployer plan’s funding standard account3

to the extent necessary to prevent withdrawal li-4

ability payments from being unduly reflected as5

advance funding for plan liabilities.6

‘‘(B) ADJUSTMENTS WHEN A MULTIEM-7

PLOYER PLAN LEAVES REORGANIZATION.—If a8

multiemployer plan is not in reorganization in9

the plan year but was in reorganization in the10

immediately preceding plan year, any balance in11

the funding standard account at the close of12

such immediately preceding plan year—13

‘‘(i) shall be eliminated by an offset-14

ting credit or charge (as the case may be),15

but16

‘‘(ii) shall be taken into account in17

subsequent plan years by being amortized18

in equal annual installments (until fully19

amortized) over 30 plan years.20

The preceding sentence shall not apply to the21

extent of any accumulated funding deficiency22

under section 418B(a) as of the end of the last23

plan year that the plan was in reorganization.24

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H.L.C.

‘‘(C) PLAN PAYMENTS TO SUPPLEMENTAL1

PROGRAM OR WITHDRAWAL LIABILITY PAYMENT2

FUND.—Any amount paid by a plan during a3

plan year to the Pension Benefit Guaranty Cor-4

poration pursuant to section 4222 of the Em-5

ployee Retirement Income Security Act of 19746

or to a fund exempt under section 501(c)(22)7

pursuant to section 4223 of such Act shall re-8

duce the amount of contributions considered re-9

ceived by the plan for the plan year.10

‘‘(D) INTERIM WITHDRAWAL LIABILITY11

PAYMENTS.—Any amount paid by an employer12

pending a final determination of the employer’s13

withdrawal liability under part 1 of subtitle E14

of title IV of such Act and subsequently re-15

funded to the employer by the plan shall be16

charged to the funding standard account in ac-17

cordance with regulations prescribed by the18

Secretary.19

‘‘(E) ELECTION FOR DEFERRAL OF20

CHARGE FOR PORTION OF NET EXPERIENCE21

LOSS.—If an election is in effect under section22

412(b)(7)(F) (as in effect on the day before the23

date of the enactment of the Pension Protection24

Act of 2005) for any plan year, the funding25

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254

H.L.C.

standard account shall be charged in the plan1

year to which the portion of the net experience2

loss deferred by such election was deferred with3

the amount so deferred (and paragraph4

(2)(B)(iv) shall not apply to the amount so5

charged).6

‘‘(F) FINANCIAL ASSISTANCE.—Any7

amount of any financial assistance from the8

Pension Benefit Guaranty Corporation to any9

plan, and any repayment of such amount, shall10

be taken into account under this section and11

section 412 in such manner as is determined by12

the Secretary.13

‘‘(G) SHORT-TERM BENEFITS.—To the ex-14

tent that any plan amendment increases the un-15

funded past service liability under the plan by16

reason of an increase in benefits which are pay-17

able under the plan during a period that does18

not exceed 14 years, paragraph (2)(B)(iii) shall19

be applied separately with respect to such in-20

crease in unfunded past service liability by sub-21

stituting the number of years of the period dur-22

ing which such benefits are payable for ‘15’.23

‘‘(c) ADDITIONAL RULES.—24

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H.L.C.

‘‘(1) DETERMINATIONS TO BE MADE UNDER1

FUNDING METHOD.—For purposes of this section,2

normal costs, accrued liability, past service liabilities,3

and experience gains and losses shall be determined4

under the funding method used to determine costs5

under the plan.6

‘‘(2) VALUATION OF ASSETS.—7


section, the value of the plan’s assets shall be9

determined on the basis of any reasonable actu-10

arial method of valuation which takes into ac-11

count fair market value and which is permitted12

under regulations prescribed by the Secretary.13

‘‘(B) ELECTION WITH RESPECT TO14

BONDS.—The value of a bond or other evidence15

of indebtedness which is not in default as to16

principal or interest may, at the election of the17

plan administrator, be determined on an amor-18

tized basis running from initial cost at purchase19

to par value at maturity or earliest call date.20

Any election under this subparagraph shall be21

made at such time and in such manner as the22

Secretary shall by regulations provide, shall23

apply to all such evidences of indebtedness, and24

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H.L.C.

may be revoked only with the consent of the1

Secretary.2

‘‘(3) ACTUARIAL ASSUMPTIONS MUST BE REA-3

SONABLE.—For purposes of this section, all costs, li-4

abilities, rates of interest, and other factors under5

the plan shall be determined on the basis of actu-6

arial assumptions and methods—7






under the plan.13

‘‘(4) TREATMENT OF CERTAIN CHANGES AS EX-14

PERIENCE GAIN OR LOSS.—For purposes of this sec-15

tion, if—16

‘‘(A) a change in benefits under the Social17

Security Act or in other retirement benefits cre-18

ated under Federal or State law, or19

‘‘(B) a change in the definition of the term20

‘wages’ under section 3121, or a change in the21

amount of such wages taken into account under22

regulations prescribed for purposes of section23

401(a)(5),24

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H.L.C.

results in an increase or decrease in accrued liability1

under a plan, such increase or decrease shall be2

treated as an experience loss or gain.3

‘‘(5) FULL FUNDING.—If, as of the close of a4

plan year, a plan would (without regard to this para-5

graph) have an accumulated funding deficiency in6

excess of the full funding limitation—7

‘‘(A) the funding standard account shall be8

credited with the amount of such excess, and9

‘‘(B) all amounts described in subpara-10

graphs (B), (C), and (D) of subsection (b)(2)11

and subparagraph (B) of subsection (b)(3)12

which are required to be amortized shall be con-13

sidered fully amortized for purposes of such14

subparagraphs.15

‘‘(6) FULL-FUNDING LIMITATION.—16


graph (5), the term ‘full-funding limitation’18

means the excess (if any) of—19

‘‘(i) the accrued liability (including20

normal cost) under the plan (determined21

under the entry age normal funding meth-22

od if such accrued liability cannot be di-23

rectly calculated under the funding method24

used for the plan), over25

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H.L.C.

‘‘(ii) the lesser of—1

‘‘(I) the fair market value of the2

plan’s assets, or3

‘‘(II) the value of such assets de-4

termined under paragraph (2).5

‘‘(B) MINIMUM AMOUNT.—6

‘‘(i) IN GENERAL.—In no event shall7

the full-funding limitation determined8

under subparagraph (A) be less than the9

excess (if any) of—10

‘‘(I) 90 percent of the current li-11

ability of the plan (including the ex-12

pected increase in current liability due13

to benefits accruing during the plan14

year), over15

‘‘(II) the value of the plan’s as-16

sets determined under paragraph (2).17

‘‘(ii) ASSETS.—For purposes of clause18

(i), assets shall not be reduced by any19

credit balance in the funding standard ac-20

count.21

‘‘(C) FULL FUNDING LIMITATION.—For22

purposes of this paragraph, unless otherwise23

provided by the plan, the accrued liability under24

a multiemployer plan shall not include benefits25

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259

H.L.C.

which are not nonforfeitable under the plan1

after the termination of the plan (taking into2

consideration section 411(d)(3)).3

‘‘(D) CURRENT LIABILITY.—For purposes4


‘‘(i) IN GENERAL.—The term ‘current6

liability’ means all liabilities to employees7

and their beneficiaries under the plan.8

‘‘(ii) TREATMENT OF UNPREDICTABLE9

CONTINGENT EVENT BENEFITS.—For pur-10

poses of clause (i), any benefit contingent11

on an event other than—12

‘‘(I) age, service, compensation,13

death, or disability, or14

‘‘(II) an event which is reason-15

ably and reliably predictable (as deter-16

mined by the Secretary),17

shall not be taken into account until the18

event on which the benefit is contingent oc-19

curs.20

‘‘(iii) INTEREST RATE USED.—The21

rate of interest used to determine current22

liability under this paragraph shall be the23

rate of interest determined under subpara-24

graph (E).25

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H.L.C.

‘‘(iv) MORTALITY TABLES.—1

‘‘(I) COMMISSIONERS’ STANDARD2

TABLE.—In the case of plan years be-3

ginning before the first plan year to4

which the first tables prescribed under5

subclause (II) apply, the mortality6

table used in determining current li-7

ability under this paragraph shall be8

the table prescribed by the Secretary9

which is based on the prevailing com-10

missioners’ standard table (described11

in section 807(d)(5)(A)) used to de-12

termine reserves for group annuity13

contracts issued on January 1, 1993.14


ITY.—The Secretary may by regula-16

tion prescribe for plan years beginning17

after December 31, 1999, mortality18

tables to be used in determining cur-19

rent liability under this subsection.20

Such tables shall be based upon the21

actual experience of pension plans and22

projected trends in such experience.23

In prescribing such tables, the Sec-24

retary shall take into account results25

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H.L.C.

of available independent studies of1

mortality of individuals covered by2

pension plans.3

‘‘(v) SEPARATE MORTALITY TABLES4

FOR THE DISABLED.—Notwithstanding5

clause (iv)—6

‘‘(I) IN GENERAL.—In the case7

of plan years beginning after Decem-8

ber 31, 1995, the Secretary shall es-9

tablish mortality tables which may be10

used (in lieu of the tables under11

clause (iv)) to determine current li-12

ability under this subsection for indi-13

viduals who are entitled to benefits14

under the plan on account of dis-15

ability. The Secretary shall establish16

separate tables for individuals whose17

disabilities occur in plan years begin-18

ning before January 1, 1995, and for19

individuals whose disabilities occur in20

plan years beginning on or after such21

date.22

‘‘(II) SPECIAL RULE FOR DIS-23

ABILITIES OCCURRING AFTER 1994.—24

In the case of disabilities occurring in25

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H.L.C.

plan years beginning after December1

31, 1994, the tables under subclause2

(I) shall apply only with respect to in-3

dividuals described in such subclause4

who are disabled within the meaning5

of title II of the Social Security Act6

and the regulations thereunder.7

‘‘(vi) PERIODIC REVIEW.—The Sec-8

retary shall periodically (at least every 59

years) review any tables in effect under10

this subparagraph and shall, to the extent11

the Secretary determines necessary, by12

regulation update the tables to reflect the13

actual experience of pension plans and pro-14

jected trends in such experience.15

‘‘(E) REQUIRED CHANGE OF INTEREST16

RATE.—For purposes of determining a plan’s17

current liability for purposes of this18

paragraph—19

‘‘(i) IN GENERAL.—If any rate of in-20

terest used under the plan under sub-21

section (b)(6) to determine cost is not22

within the permissible range, the plan shall23

establish a new rate of interest within the24

permissible range.25

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H.L.C.

‘‘(ii) PERMISSIBLE RANGE.—For pur-1

poses of this subparagraph—2

‘‘(I) IN GENERAL.—Except as3

provided in subclause (II), the term4

‘permissible range’ means a rate of in-5

terest which is not more than 5 per-6

cent above, and not more than 10 per-7

cent below, the weighted average of8

the rates of interest on 30-year Treas-9

ury securities during the 4-year period10

ending on the last day before the be-11

ginning of the plan year.12


ITY.—If the Secretary finds that the14

lowest rate of interest permissible15

under subclause (I) is unreasonably16

high, the Secretary may prescribe a17

lower rate of interest, except that18

such rate may not be less than 8019

percent of the average rate deter-20

mined under such subclause.21

‘‘(iii) ASSUMPTIONS.—Notwith-22

standing paragraph (3)(A), the interest23

rate used under the plan shall be—24

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H.L.C.

‘‘(I) determined without taking1

into account the experience of the2

plan and reasonable expectations, but3

‘‘(II) consistent with the assump-4

tions which reflect the purchase rates5

which would be used by insurance6

companies to satisfy the liabilities7

under the plan.8

‘‘(7) ANNUAL VALUATION.—9


section, a determination of experience gains and11

losses and a valuation of the plan’s liability12

shall be made not less frequently than once13

every year, except that such determination shall14

be made more frequently to the extent required15

in particular cases under regulations prescribed16

by the Secretary.17

‘‘(B) VALUATION DATE.—18

‘‘(i) CURRENT YEAR.—Except as pro-19

vided in clause (ii), the valuation referred20

to in subparagraph (A) shall be made as of21

a date within the plan year to which the22

valuation refers or within one month prior23

to the beginning of such year.24

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H.L.C.

‘‘(ii) USE OF PRIOR YEAR VALU-1

ATION.—The valuation referred to in sub-2

paragraph (A) may be made as of a date3

within the plan year prior to the year to4

which the valuation refers if, as of such5

date, the value of the assets of the plan are6

not less than 100 percent of the plan’s cur-7

rent liability (as defined in paragraph8

(6)(D) without regard to clause (iv) there-9

of).10

‘‘(iii) ADJUSTMENTS.—Information11

under clause (ii) shall, in accordance with12

regulations, be actuarially adjusted to re-13

flect significant differences in participants.14

‘‘(iv) LIMITATION.—A change in fund-15

ing method to use a prior year valuation,16

as provided in clause (ii), may not be made17

unless as of the valuation date within the18

prior plan year, the value of the assets of19

the plan are not less than 125 percent of20

the plan’s current liability (as defined in21

paragraph (6)(D) without regard to clause22

(iv) thereof).23

‘‘(8) TIME WHEN CERTAIN CONTRIBUTIONS24

DEEMED MADE.—For purposes of this section, any25

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contributions for a plan year made by an employer1

after the last day of such plan year, but not later2

than two and one-half months after such day, shall3

be deemed to have been made on such last day. For4

purposes of this subparagraph, such two and one-5

half month period may be extended for not more6

than six months under regulations prescribed by the7

Secretary.8

‘‘(9) INTEREST RULE FOR WAIVERS AND EX-9

TENSIONS.—The interest rate applicable for any10

plan year for purposes of computing the amortiza-11

tion charge described in subsection (b)(2)(C) and in12

connection with an extension granted under sub-13

section (d) shall be the greater of—14

‘‘(A) 150 percent of the Federal mid-term15

rate (as in effect under section 1274 for the 1st16

month of such plan year), or17

‘‘(B) the rate of interest used under the18

plan for determining costs.19

‘‘(d) EXTENSION OF AMORTIZATION PERIODS FOR20

MULTIEMPLOYER PLANS.—In the case of a multiemployer21

plan—22

‘‘(1) EXTENSION.—The period of years re-23

quired to amortize any unfunded liability (described24

in any clause of subsection (b)(2)(B)) of any multi-25

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employer plan shall be extended by the Secretary for1

a period of time (not in excess of 5 years) if it is2

demonstrated to the Secretary that—3

‘‘(A) absent the extension, the plan would4

have an accumulated funding deficiency in any5

of the next 10 plan years,6

‘‘(B) the plan sponsor has adopted a plan7

to improve the plan’s funding status, and8

‘‘(C) taking into account the extension, the9

plan is projected to have sufficient assets to10

timely pay its expected benefit liabilities and11

other anticipated expenditures.12

‘‘(2) ADDITIONAL EXTENSION.—The period of13

years required to amortize any unfunded liability14

(described in any clause of subsection (b)(2)(B)) of15

any multiemployer plan may be extended (in addi-16

tion to any extension under paragraph (1)) by the17

Secretary for a period of time (not in excess of 518

years) if the Secretary determines that such exten-19

sion would carry out the purposes of the Employee20

Retirement Income Security Act of 1974 and would21

provide adequate protection for participants under22

the plan and their beneficiaries and if the Secretary23

determines that the failure to permit such extension24

would—25

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H.L.C.

‘‘(A) result in—1

‘‘(i) a substantial risk to the voluntary2

continuation of the plan, or3

‘‘(ii) a substantial curtailment of pen-4

sion benefit levels or employee compensa-5

tion, and6

‘‘(B) be adverse to the interests of plan7

participants in the aggregate.8


‘‘(A) IN GENERAL.—The Secretary shall,10

before granting an extension under this section,11

require each applicant to provide evidence satis-12

factory to the Secretary that the applicant has13

provided notice of the filing of the application14

for such extension to each affected party (as de-15

fined in section 4001(a)(21) of the Employee16

Retirement Income Security Act of 1974) with17

respect to the affected plan. Such notice shall18

include a description of the extent to which the19

plan is funded for benefits which are guaran-20

teed under title IV of such Act and for benefit21

liabilities.22


FORMATION.—The Secretary shall consider any24

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relevant information provided by a person to1

whom notice was given under paragraph (1).’’.2


(1) Section 418(b)(2) of such Code is4

amended—5

(A) by striking ‘‘section 412(b)(2)’’ in sub-6

paragraph (A) and inserting ‘‘section7

431(b)(2)’’, and8

(B) by striking ‘‘section 412(b)(3)(B)’’ in9

subparagraph (B) and inserting ‘‘section10

431(b)(3)(B)’’.11

(2) Section 418B of such Code is amended—12

(A) by striking ‘‘section 412(b)(2)(A) or13

(B)’’ in subsection (d)(1)(B) and inserting14

‘‘section 431(b)(2)(A) or (B)’’,15

(B) by striking ‘‘section 412(c)(8)’’ in sub-16

section (e) and inserting ‘‘section 412(d)(2)’’,17

and18

(C) by striking ‘‘section 412(c)(3)’’ in sub-19

section (g) and inserting ‘‘section 431(c)(3)’’.20

(3) Section 418D(a)(2) of such Code is21

amended—22

(A) by striking ‘‘section 412(c)(8)’’ and in-23

serting ‘‘section 412(d)(2)’’, and24

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(B) by striking ‘‘section 412(c)(10)’’ and1

inserting ‘‘section 431(c)(8)’’.2

(c) CLERICAL AMENDMENT.—The table of sections3

for subpart A of part III of subchapter D of chapter 14

of such Code is amended by adding after the item relating5

to section 430 the following new item:6

‘‘Sec. 431. Minimum funding standards for multiemployer plans.’’.



cember 31, 2006.9

SEC. 212. ADDITIONAL FUNDING RULES FOR MULTIEM-10

PLOYER PLANS IN ENDANGERED OR CRIT-11

ICAL STATUS.12

(a) IN GENERAL.—Subpart A of part III of sub-13

chapter D of chapter 1 of the Internal Revenue Code of14

1986 is amended by inserting after section 431 the fol-15

lowing new section:16

‘‘SEC. 432. ADDITIONAL FUNDING RULES FOR MULTIEM-17

PLOYER PLANS IN ENDANGERED STATUS OR18

CRITICAL STATUS.19

‘‘(a) ANNUAL CERTIFICATION BY PLAN ACTUARY.—20

‘‘(1) IN GENERAL.—During the 90-day period21

beginning on first day of each plan year of a multi-22

employer plan, the plan actuary shall certify to the23

Secretary whether or not the plan is in endangered24

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status for such plan year and whether or not the1

plan is in critical status for such plan year.2

‘‘(2) ACTUARIAL PROJECTIONS OF ASSETS AND3

LIABILITIES.—4

‘‘(A) IN GENERAL.—In making the deter-5

minations under paragraph (1), the plan actu-6

ary shall make projections under subsections7

(b)(2) and (c)(2) for the current and succeeding8

plan years, using reasonable actuarial assump-9

tions and methods, of the current value of the10

assets of the plan and the present value of all11

liabilities to participants and beneficiaries under12

the plan for the current plan year as of the be-13

ginning of such year, as based on the actuarial14

statement prepared for the preceding plan year15

under section 103(d) of the Employee Retire-16

ment Income Security Act of 1974.17

‘‘(B) DETERMINATIONS OF FUTURE CON-18

TRIBUTIONS.—Any such actuarial projection of19

plan assets shall assume—20

‘‘(i) reasonably anticipated employer21

and employee contributions for the current22

and succeeding plan years, assuming that23

the terms of the one or more collective bar-24

gaining agreements pursuant to which the25

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plan is maintained for the current plan1

year continue in effect for succeeding plan2

years, or3

‘‘(ii) that employer and employee con-4

tributions for the most recent plan year5

will continue indefinitely, but only if the6

plan actuary determines there have been7

no significant demographic changes that8

would make continued application of such9

terms unreasonable.10

‘‘(3) PRESUMED STATUS IN ABSENCE OF TIME-11

LY ACTUARIAL CERTIFICATION.—If certification12

under this subsection is not made before the end of13

the 90-day period specified in paragraph (1), the14

plan shall be presumed to be in critical status for15

such plan year until such time as the plan actuary16

makes a contrary certification.17

‘‘(4) NOTICE.—In any case in which a multiem-18

ployer plan is certified to be in endangered status19

under paragraph (1) or enters into critical status,20

the plan sponsor shall, not later than 30 days after21

the date of the certification or entry, provide notifi-22

cation of the endangered or critical status to the23

participants and beneficiaries, the bargaining par-24

ties, the Pension Benefit Guaranty Corporation, the25

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Secretary of the Treasury, and the Secretary of1

Labor.2

‘‘(b) FUNDING RULES FOR MULTIEMPLOYER PLANS3

IN ENDANGERED STATUS.—4


multiemployer plan is in endangered status for a6

plan year and no funding improvement plan under7

this subsection with respect to such multiemployer8

plan is in effect for the plan year, the plan sponsor9

shall, in accordance with this subsection, amend the10

multiemployer plan to include a funding improve-11

ment plan upon approval thereof by the bargaining12

parties under this subsection. The amendment shall13

be adopted not later than 240 days after the date14

on which the plan is certified to be in endangered15

status under subsection (a)(1).16

‘‘(2) ENDANGERED STATUS.—A multiemployer17

plan is in endangered status for a plan year if, as18

determined by the plan actuary under subsection19

(a)—20

‘‘(A) the plan’s funded percentage for such21

plan year is less than 80 percent, or22

‘‘(B) the plan has an accumulated funding23

deficiency for such plan year under section 43124

or is projected to have such an accumulated25

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funding deficiency for any of the 6 succeeding1

plan years, taking into account any extension of2

amortization periods under section 431(d).3

‘‘(3) FUNDING IMPROVEMENT PLAN.—4

‘‘(A) BENCHMARKS.—A funding improve-5

ment plan shall consist of amendments to the6

plan formulated to provide, under reasonable7

actuarial assumptions, for the attainment, dur-8

ing the funding improvement period under the9

funding improvement plan, of the following10

benchmarks:11

‘‘(i) INCREASE IN FUNDED PERCENT-12

AGE.—An increase in the plan’s funded13

percentage such that—14

‘‘(I) the difference between 10015

percent and the plan’s funded per-16

centage for the last year of the fund-17

ing improvement period, is not more18

than19

‘‘(II) 2⁄3 of the difference between20

100 percent and the plan’s funded21

percentage for the first year of the22

funding improvement period.23

‘‘(ii) AVOIDANCE OF ACCUMULATED24

FUNDING DEFICIENCIES.—No accumulated25

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H.L.C.

funding deficiency for any plan year during1

the funding improvement period (taking2


periods under section 431(d)).4

‘‘(B) FUNDING IMPROVEMENT PERIOD.—5

The funding improvement period for any fund-6

ing improvement plan adopted pursuant to this7

subsection is the 10-year period beginning on8

the earlier of—9


date of the adoption of the funding im-11

provement plan, or12



the plan year in which occurs the first date15

after the day of the certification as of16

which collective bargaining agreements cov-17

ering on the day of such certification at18

least 75 percent of active participants in19

such multiemployer plan have expired.20

‘‘(C) SPECIAL RULES FOR CERTAIN SERI-21

OUSLY UNDERFUNDED PLANS.—22

‘‘(i) In the case of a plan in which the23

funded percentage of a plan for the plan24

year is 70 percent or less, subparagraph25

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H.L.C.

(A)(i)(II) shall be applied by substituting1

‘4⁄5’ for ‘2⁄3’ and subparagraph (B) shall be2

applied by substituting ‘the 15-year period’3

for ‘the 10-year period’.4

‘‘(ii) In the case of a plan in which5

the funded percentage of a plan for the6

plan year is more than 70 percent but less7

than 80 percent, and—8

‘‘(I) the plan actuary certifies9

within 30 days after certification10

under subsection (a)(1) that the plan11

is not able to attain the increase de-12

scribed in subparagraph (A)(i) over13

the period described in subparagraph14

(B), and15

‘‘(II) the plan year is prior to the16

day described in subparagraph (B)(ii),17

subparagraph (A)(i)(II) shall be applied by18

substituting ‘4⁄5’ for ‘2⁄3’ and subparagraph19

(B) shall be applied by substituting ‘the20

15-year period’ for ‘the 10-year period’.21

‘‘(iii) For any plan year following the22

year described in clause (ii)(II), subpara-23

graph (A)(i)(II) and subparagraph (B)24

shall apply, except that for each plan year25

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H.L.C.

ending after such date for which the plan1

actuary certifies (at the time of the annual2

certification under subsection (a)(1) for3

such plan year) that the plan is not able4

to attain the increase described in subpara-5

graph (A)(i) over the period described in6

subparagraph (B), subparagraph (B) shall7

be applied by substituting ‘the 15-year pe-8

riod’ for ‘the 10-year period’.9

‘‘(D) REPORTING.—A summary of any10

funding improvement plan or modification11

thereto adopted during any plan year, together12

with annual updates regarding the funding13

ratio of the plan, shall be included in the an-14

nual report for such plan year under section15

104(a) of the Employee Retirement Income Se-16

curity Act of 1974 and in the summary annual17

report described in section 104(b)(3) of such18

Act.19

‘‘(4) DEVELOPMENT OF FUNDING IMPROVE-20

MENT PLAN.—21

‘‘(A) ACTIONS BY PLAN SPONSOR PENDING22

APPROVAL.—Pending the approval of a funding23

improvement plan under this paragraph, the24

plan sponsor shall take all reasonable actions,25

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H.L.C.

consistent with the terms of the plan and appli-1

cable law, necessary to ensure—2

‘‘(i) an increase in the plan’s funded3

percentage, and4

‘‘(ii) postponement of an accumulated5

funding deficiency for at least 1 additional6

plan year.7

Such actions include applications for extensions8

of amortization periods under section 431(d),9

use of the shortfall funding method in making10

funding standard account computations,11

amendments to the plan’s benefit structure, re-12

ductions in future benefit accruals, and other13

reasonable actions consistent with the terms of14

the plan and applicable law.15

‘‘(B) RECOMMENDATIONS BY PLAN SPON-16

SOR.—17

‘‘(i) IN GENERAL.—During the period18

of 90 days following the date on which a19

multiemployer plan is certified to be in en-20

dangered status, the plan sponsor shall de-21

velop and provide to the bargaining parties22

alternative proposals for revised benefit23

structures, contribution structures, or24

both, which, if adopted as amendments to25

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H.L.C.

the plan, may be reasonably expected to1

meet the benchmarks described in para-2

graph (3)(A). Such proposals shall3

include—4

‘‘(I) at least one proposal for re-5

ductions in the amount of future ben-6

efit accruals necessary to achieve the7

benchmarks, assuming no amend-8

ments increasing contributions under9

the plan (other than amendments in-10

creasing contributions necessary to11

achieve the benchmarks after amend-12

ments have reduced future benefit ac-13

cruals to the maximum extent per-14

mitted by law), and15

‘‘(II) at least one proposal for in-16

creases in contributions under the17

plan necessary to achieve the bench-18

marks, assuming no amendments re-19

ducing future benefit accruals under20

the plan.21

‘‘(ii) REQUESTS BY BARGAINING PAR-22

TIES.—Upon the request of any bargaining23

party who—24

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H.L.C.

‘‘(I) employs at least 5 percent of1

the active participants, or2

‘‘(II) represents as an employee3

organization, for purposes of collective4

bargaining, at least 5 percent of the5

active participants,6

the plan sponsor shall provide all such par-7

ties information as to other combinations8

of increases in contributions and reduc-9

tions in future benefit accruals which10

would result in achieving the benchmarks.11

‘‘(iii) OTHER INFORMATION.—The12

plan sponsor may, as it deems appropriate,13

prepare and provide the bargaining parties14

with additional information relating to con-15

tribution structures or benefit structures16

or other information relevant to the fund-17

ing improvement plan.18

‘‘(5) MAINTENANCE OF CONTRIBUTIONS PEND-19

ING APPROVAL OF FUNDING IMPROVEMENT PLAN.—20

Pending approval of a funding improvement plan by21

the bargaining parties with respect to a multiem-22

ployer plan, the multiemployer plan may not be23

amended so as to provide—24

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H.L.C.

‘‘(A) a reduction in the level of contribu-1

tions for participants who are not in pay status,2

‘‘(B) a suspension of contributions with re-3

spect to any period of service, or4

‘‘(C) any new direct or indirect exclusion5

of younger or newly hired employees from plan6

participation.7

‘‘(6) BENEFIT RESTRICTIONS PENDING AP-8

PROVAL OF FUNDING IMPROVEMENT PLAN.—Pend-9

ing approval of a funding improvement plan by the10

bargaining parties with respect to a multiemployer11

plan—12

‘‘(A) RESTRICTIONS ON LUMP SUM AND13

SIMILAR DISTRIBUTIONS.—In any case in which14

the present value of a participant’s accrued15

benefit under the plan exceeds $5,000, such16

benefit may not be distributed as an immediate17

distribution or in any other accelerated form.18

‘‘(B) PROHIBITION ON BENEFIT IN-19

CREASES.—20

‘‘(i) IN GENERAL.—No amendment of21

the plan which increases the liabilities of22

the plan by reason of any increase in bene-23

fits, any change in the accrual of benefits,24

or any change in the rate at which benefits25

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H.L.C.

become nonforfeitable under the plan may1

be adopted.2

‘‘(ii) EXCEPTION.—Clause (i) shall3

not apply to any plan amendment which is4

required as a condition of qualification5

under part I of subchapter D of chapter 16

of subtitle A.7

‘‘(7) DEFAULT CRITICAL STATUS IF NO FUND-8

ING IMPROVEMENT PLAN ADOPTED.—If no plan9

amendment adopting a funding improvement plan10

has been adopted by the end of the 240-day period11

referred to in subsection (b)(1), the plan enters into12

critical status as of the first day of the succeeding13

plan year.14

‘‘(8) RESTRICTIONS UPON APPROVAL OF FUND-15

ING IMPROVEMENT PLAN.—Upon adoption of a16

funding improvement plan with respect to a multi-17

employer plan, the plan may not be amended—18

‘‘(A) so as to be inconsistent with the19

funding improvement plan, or20




crease, the plan is reasonably expected to meet24

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283

H.L.C.

the the benchmarks described in paragraph1

(3)(A).2

‘‘(c) FUNDING RULES FOR MULTIEMPLOYER PLANS3

IN CRITICAL STATUS.—4


multiemployer plan is in critical status for a plan6

year as described in paragraph (2) (or otherwise en-7

ters into critical status under this section) and no8

rehabilitation plan under this subsection with respect9

to such multiemployer plan is in effect for the plan10

year, the plan sponsor shall, in accordance with this11

subsection, amend the multiemployer plan to include12

a rehabilitation plan under this subsection. The13

amendment shall be adopted not later than 240 days14

after the date on which the plan enters into critical15

status.16

‘‘(2) CRITICAL STATUS.—A multiemployer plan17

is in critical status for a plan year if—18

‘‘(A) the plan is in endangered status for19

the preceding plan year and the requirements of20

subsection (b)(1) were not met with respect to21

the plan for such preceding plan year, or22

‘‘(B) as determined by the plan actuary23

under subsection (a), the plan is described in24

paragraph (3).25

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H.L.C.

‘‘(3) CRITICALITY DESCRIPTION.—For purposes1

of paragraph (2)(B), a plan is described in this2

paragraph if the plan is described in at least one of3

the following subparagraphs:4

‘‘(A) A plan is described in this subpara-5


year—7


is less than 65 percent, and9

‘‘(ii) the sum of—10

‘‘(I) the market value of plan as-11

sets, plus12

‘‘(II) the present value of the13

reasonably anticipated employer and14

employee contributions for the current15

plan year and each of the 6 suc-16

ceeding plan years, assuming that the17

terms of the one or more collective18

bargaining agreements pursuant to19

which the plan is maintained for the20

current plan year continue in effect21

for succeeding plan years,22

is less than the present value of all non-23

forfeitable benefits for all participants and24

beneficiaries projected to be payable under25

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H.L.C.

the plan during the current plan year and1

each of the 6 succeeding plan years (plus2

administrative expenses for such plan3

years).4

‘‘(B) A plan is described in this subpara-5


year, the sum of—7

‘‘(i) the market value of plan assets,8

plus9

‘‘(ii) the present value of the reason-10

ably anticipated employer and employee11

contributions for the current plan year and12

each of the 4 succeeding plan years, as-13

suming that the terms of the one or more14

collective bargaining agreements pursuant15

to which the plan is maintained for the16

current plan year remain in effect for suc-17

ceeding plan years,18

is less than the present value of all nonforfeit-19

able benefits for all participants and bene-20

ficiaries projected to be payable under the plan21

during the current plan year and each of the 422

succeeding plan years (plus administrative ex-23

penses for such plan years).24

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H.L.C.

‘‘(C) A plan is described in this subpara-1

graph if—2

‘‘(i) as of the beginning of the current3

plan year, the funded percentage of the4

plan is less than 65 percent, and5

‘‘(ii) the plan has an accumulated6

funding deficiency for the current plan7

year or is projected to have an accumu-8

lated funding deficiency for any of the 49

succeeding plan years, not taking into ac-10

count any extension of amortization peri-11

ods under section 431(d).12

‘‘(D) A plan is described in this subpara-13

graph if—14

‘‘(i)(I) the plan’s normal cost for the15

current plan year, plus interest (deter-16

mined at the rate used for determining17

cost under the plan) for the current plan18

year on the amount of unfunded benefit li-19

abilities under the plan as of the last date20

of the preceding plan year, exceeds21

‘‘(II) the present value, as of the be-22

ginning of the current plan year, of the23

reasonably anticipated employer and em-24

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H.L.C.

ployee contributions for the current plan1

year,2

‘‘(ii) the present value, as of the be-3

ginning of the current plan year, of non-4

forfeitable benefits of inactive participants5

is greater than the present value, as of the6

beginning of the current plan year, of non-7

forfeitable benefits of active participants,8

and9

‘‘(iii) the plan is projected to have an10

accumulated funding deficiency for the11

current plan year or any of the 4 suc-12

ceeding plan years, not taking into account13

any extension of amortization periods14


‘‘(E) A plan is described in this subpara-16

graph if—17


is greater than 65 percent for the current19

plan year, and20

‘‘(ii) the plan is projected to have an21

accumulated funding deficiency during any22

of the succeeding 3 plan years, not taking23


periods under section 431(d).25

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H.L.C.

‘‘(4) REHABILITATION PLAN.—1

‘‘(A) IN GENERAL.—A rehabilitation plan2

shall consist of—3

‘‘(i) amendments to the plan providing4

(under reasonable actuarial assumptions)5

for measures, agreed to by the bargaining6

parties, to increase contributions, reduce7

plan expenditures (including plan mergers8

and consolidations), or reduce future ben-9

efit accruals, or to take any combination of10

such actions, determined necessary to11

cause the plan to cease, during the reha-12

bilitation period, to be in critical status, or13

‘‘(ii) reasonable measures to forestall14

possible insolvency (within the meaning of15

section 418E) if the plan sponsor deter-16

mines that, upon exhaustion of all reason-17

able measures, the plan would not cease18

during the rehabilitation period to be in19

critical status.20

A rehabilitation must provide annual standards21

for meeting the requirements of such rehabilita-22

tion plan.23

‘‘(B) REHABILITATION PERIOD.—The re-24

habilitation period for any rehabilitation plan25

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H.L.C.

adopted pursuant to this subsection is the 10-1

year period beginning on the earlier of—2


date of the adoption of the rehabilitation4

plan, or5



the plan year in which occurs the first8

date, after the date of the plan’s entry into9

critical status, as of which collective bar-10

gaining agreements covering at least 7511

percent of active participants in such mul-12

tiemployer plan (determined as of such13

date of entry) have expired.14

‘‘(C) REPORTING.—A summary of any re-15

habilitation plan or modification thereto adopt-16

ed during any plan year, together with annual17

updates regarding the funding ratio of the plan,18

shall be included in the annual report for such19

plan year under section 104(a) of the Employee20

Retirement Income Security Act of 1974 and in21

the summary annual report described in section22

104(b)(3) of such Act.23

‘‘(5) DEVELOPMENT OF REHABILITATION24

PLAN.—25

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H.L.C.

‘‘(A) PROPOSALS BY PLAN SPONSOR.—1

‘‘(i) IN GENERAL.—Within 90 days2

after the date of entry into critical status3

(or the date as of which the requirements4

of subsection (b)(1) are not met with re-5

spect to the plan), the plan sponsor shall6

propose to all bargaining parties a range of7

alternative schedules of increases in con-8

tributions and reductions in future benefit9

accruals that would serve to carry out a re-10

habilitation plan under this subsection.11

‘‘(ii) PROPOSAL ASSUMING NO CON-12

TRIBUTION INCREASES.—Such proposals13

shall include, as one of the proposed sched-14

ules, a schedule of those reductions in fu-15

ture benefit accruals that would be nec-16

essary to cause the plan to cease to be in17

critical status if there were no further in-18

creases in rates of contribution to the plan.19

‘‘(iii) PROPOSAL WHERE CONTRIBU-20

TIONS ARE NECESSARY.—If the plan spon-21

sor determines that the plan will not cease22

to be in critical status during the rehabili-23

tation period unless the plan is amended to24

provide for an increase in contributions,25

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H.L.C.

the plan sponsor’s proposals shall include a1

schedule of those increases in contribution2

rates that would be necessary to cause the3

plan to cease to be in critical status if fu-4

ture benefit accruals were reduced to the5

maximum extent permitted by law.6

‘‘(B) REQUESTS FOR ADDITIONAL SCHED-7

ULES.—Upon the request of any bargaining8

party who—9

‘‘(i) employs at least 5 percent of the10

active participants, or11

‘‘(ii) represents as an employee orga-12

nization, for purposes of collective bar-13

gaining, at least 5 percent of active partici-14

pants,15

the plan sponsor shall include among the pro-16

posed schedules such schedules of increases in17

contributions and reductions in future benefit18

accruals as may be specified by the bargaining19

parties.20

‘‘(C) SUBSEQUENT AMENDMENTS.—Upon21

the adoption of a schedule of increases in con-22

tributions or reductions in future benefit accru-23

als as part of the rehabilitation plan, the plan24

sponsor may amend the plan thereafter to up-25

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H.L.C.

date the schedule to adjust for any experience1

of the plan contrary to past actuarial assump-2

tions, except that such an amendment may be3

made not more than once in any 3-year period.4

‘‘(D) ALLOCATION OF REDUCTIONS IN FU-5

TURE BENEFIT ACCRUALS.—Any schedule con-6

taining reductions in future benefit accruals7

forming a part of a rehabilitation plan shall be8

applicable with respect to any group of active9

participants who are employed by any bar-10

gaining party (as an employer obligated to con-11

tribute under the plan) in proportion to the ex-12

tent to which increases in contributions under13

such schedule apply to such bargaining party.14

‘‘(E) LIMITATION ON REDUCTION IN15

RATES OF FUTURE ACCRUALS.—Any schedule16

proposed under this paragraph shall not reduce17

the rate of future accruals below the lower of—18

‘‘(i) a monthly benefit equal to 1 per-19

cent of the contributions required to be20

made with respect to a participant or the21

equivalent standard accrual rate for a par-22

ticipant or group of participants under the23

collective bargaining agreements in effect24

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H.L.C.

as of the first day of the plan year in1

which the plan enters critical status, or2

‘‘(ii) if lower, the accrual rate under3

the plan on such date.4

The equivalent standard accrual rate shall be5

determined by the trustees based on the stand-6

ard or average contribution base units that they7

determine to be representative for active partici-8

pants and such other factors as they determine9

to be relevant.10

‘‘(F) PROTECTION OF RESTORED RATES11

OF ACCRUAL.—12

‘‘(i) IN GENERAL.—Any schedule pro-13

posed under this paragraph shall not re-14

duce the rate of future accruals below any15

restored accrual rate.16

‘‘(ii) RESTORED ACCRUAL RATE.—For17

purposes of clause (i), the term ‘restored18

accrual rate’ means a rate of benefit accru-19

als which was reduced and subsequently20

restored before entry of the plan into crit-21

ical status.22

‘‘(6) MAINTENANCE OF CONTRIBUTIONS AND23

RESTRICTIONS ON BENEFITS PENDING ADOPTION OF24

REHABILITATION PLAN.—The rules of paragraphs25

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H.L.C.

(5) and (6) of subsection (b) shall apply for pur-1

poses of this subsection by substituting the term ‘re-2

habilitation plan’ for ‘funding improvement plan’.3

‘‘(7) SPECIAL RULES.—4

‘‘(A) AUTOMATIC EMPLOYER SUR-5

CHARGE.—6

‘‘(i) 5 PERCENT AND 10 PERCENT7

SURCHARGE.—For the first plan year in8

which the plan is in critical status, each9

employer otherwise obligated to make a10

contribution for that plan year shall be ob-11

ligated to pay to the plan a surcharge12

equal to 5 percent of the contribution oth-13

erwise required under the respective collec-14

tive bargaining agreement (or other agree-15

ment pursuant to which the employer con-16

tributes). For each consecutive plan year17

thereafter in which the plan is in critical18

status, the surcharge shall be 10 percent of19

the contribution otherwise required under20

the respective collective bargaining agree-21

ment (or other agreement pursuant to22

which the employer contributes).23

‘‘(ii) ENFORCEMENT OF SUR-24

CHARGE.—The surcharges under clause (i)25

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H.L.C.

shall be due and payable on the same1

schedule as the contributions on which2

they are based. Any failure to make a sur-3

charge payment shall be treated as a delin-4

quent contribution under section 515 of5

the Employee Retirement Income Security6

Act of 1974 and shall be enforceable as7

such.8

‘‘(iii) SURCHARGE TO TERMINATE9

UPON CBA RENEGOTIATION.—The sur-10

charge under this paragraph shall cease to11

be effective with respect to employees cov-12

ered by a collective bargaining agreement,13

beginning on the date on which that agree-14

ment is renegotiated to include—15

‘‘(I) a schedule of benefits and16

contributions published by the trust-17

ees pursuant to the plan’s rehabilita-18

tion plan, or19

‘‘(II) otherwise collectively bar-20

gained benefit changes.21

‘‘(iv) SURCHARGE NOT TO APPLY22

UNTIL EMPLOYER RECEIVES 30-DAY NO-23

TICE.—The surcharge under this subpara-24

graph shall not apply to an employer until25

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296

H.L.C.

30 days after the employer has been noti-1

fied by the trustees that the plan is in crit-2

ical status and that the surcharge is in ef-3

fect.4

‘‘(v) SURCHARGE NOT TO GENERATE5

INCREASED BENEFIT ACCRUALS.—Not-6

withstanding any provision of a plan to the7

contrary, the amount of any surcharge8

shall not be the basis for any benefit ac-9

cruals under the plan.10

‘‘(B) BENEFIT ADJUSTMENTS.—11

‘‘(i) IN GENERAL.—The trustees shall12

make appropriate reductions, if any, to ad-13

justable benefits based upon the outcome14

of collective bargaining over the schedules15

provided under paragraph (5).16

‘‘(ii) RETIREE PROTECTION.—Except17

as provided in subparagraph (C), the trust-18

ees of a plan in critical status may not re-19

duce adjustable benefits of any participant20

or beneficiary who was in pay status at21

least one year before the first day of the22

first plan year in which the plan enters23

into critical status.24

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H.L.C.

‘‘(iii) TRUSTEE FLEXIBILITY.—The1

trustees shall include in the schedules pro-2

vided to the bargaining parties an allow-3

ance for funding the benefits of partici-4

pants with respect to whom contributions5

are not currently required to be made, and6

shall reduce their benefits to the extent7

permitted under this title and considered8

appropriate based on the plan’s then cur-9

rent overall funding status and its future10

prospects in light of the results of the par-11

ties’ negotiations.12

‘‘(C) ADJUSTABLE BENEFIT DEFINED.—13

For purposes of this paragraph, the term ‘ad-14

justable benefit’ means—15

‘‘(i) benefits, rights, and features,16

such as post-retirement death benefits, 60-17

month guarantees, disability benefits not18

yet in pay status, and similar benefits,19

‘‘(ii) retirement-type subsidies, early20

retirement benefits, and benefit payment21

options (other than the 50 percent quali-22

fied joint-and-survivor benefit and single23

life annuity), and24

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H.L.C.

‘‘(iii) benefit increases that would not1

be eligible for a guarantee under section2

4022A of the Employee Retirement Income3

Security Act of 1974 on the first day of4

the plan year in which the plan enters into5

critical status because they were adopted,6

or if later, took effect less than 60 months7

before reorganization.8

‘‘(D) NORMAL RETIREMENT BENEFITS9

PROTECTED.—Nothing in this paragraph shall10

be construed to permit a plan to reduce the11

level of a participant’s accrued benefit payable12

at normal retirement age which is not an ad-13

justable benefit.14

‘‘(E) ADJUSTMENTS DISREGARDED IN15

WITHDRAWAL LIABILITY DETERMINATION.—16

‘‘(i) BENEFIT REDUCTIONS.—Any17

benefit reductions under this paragraph18

shall be disregarded in determining a19

plan’s unfunded vested benefits for pur-20

poses of determining an employer’s with-21

drawal liability under section 4201 of the22

Employee Retirement Income Security Act23

of 1974.24

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299

H.L.C.

‘‘(ii) SURCHARGES.—Any surcharges1

under this paragraph shall be disregarded2

in determining an employer’s withdrawal3

liability under section 4211 of the Em-4

ployee Retirement Income Security Act of5

1974, except for purposes of determining6

the unfunded vested benefits attributable7

to an employer or under a modified attrib-8

utable method adopted with the approval9

of the Pension Benefit Guaranty Corpora-10

tion under subsection (c)(5) of that sec-11

tion.12

‘‘(8) RESTRICTIONS UPON APPROVAL OF REHA-13

BILITATION PLAN.—Upon adoption of a rehabilita-14

tion plan with respect to a multiemployer plan, the15

plan may not be amended—16

‘‘(A) so as to be inconsistent with the re-17

habilitation plan, or18




crease, the plan is reasonably expected to cease22

to be in critical status.23

‘‘(9) IMPLEMENTATION OF DEFAULT SCHED-24

ULE UPON FAILURE TO ADOPT REHABILITATION25

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300

H.L.C.

PLAN.—If the plan is not amended by the end of the1

240-day period after entry into critical status to in-2

clude a rehabilitation plan, the plan sponsor shall3

amend the plan to implement the schedule required4

by paragraph (5)(A)(ii).5

‘‘(10) DEEMED WITHDRAWAL.—Upon the fail-6

ure of any employer who has an obligation to con-7

tribute under the plan to make contributions in com-8

pliance with the schedule adopted under paragraph9

(4) as part of the rehabilitation plan, the failure of10

the employer may, at the discretion of the plan spon-11

sor, be treated as a withdrawal by the employer from12

the plan under section 4203 of the Employee Retire-13

ment Income Security Act of 1974 or a partial with-14

drawal by the employer under section 4205 of such15

Act.16

‘‘(11) SPECIAL RULE FOR PLAN AMEND-17

MENTS.—A multiemployer plan in critical status18

shall not fail to meet the requirements of section19

204(g) of the Employee Retirement Income Security20

Act of 1974 or section 411(d)(6) solely by reason of21

the adoption by the plan of an amendment necessary22

to meet the requirements of this subsection.23

‘‘(d) DEFINITIONS.—For purposes of this section—24

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301

H.L.C.

‘‘(1) BARGAINING PARTY.—The term ‘bar-1

gaining party’ means, in connection with a multiem-2

ployer plan—3

‘‘(A) an employer who has an obligation to4

contribute under the plan, and5

‘‘(B) an employee organization which, for6

purposes of collective bargaining, represents7

plan participants employed by such an em-8

ployer.9

‘‘(2) FUNDED PERCENTAGE.—The term ‘fund-10

ed percentage’ means the percentage expressed as a11

ratio of which—12

‘‘(A) the numerator of which is the value13

of the plan’s assets, as determined under sec-14

tion 431(c)(2), and15

‘‘(B) the denominator of which is the ac-16

crued liability of the plan.17

‘‘(3) ACCUMULATED FUNDING DEFICIENCY.—18

The term ‘accumulated funding deficiency’ has the19

meaning provided such term in section 431(a).20

‘‘(4) ACTIVE PARTICIPANT.—The term ‘active21

participant’ means, in connection with a multiem-22

ployer plan, a participant who is in covered service23

under the plan.24

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H.L.C.

‘‘(5) INACTIVE PARTICIPANT.—The term ‘inac-1

tive participant’ means, in connection with a multi-2

employer plan, a participant who—3

‘‘(A) is not in covered service under the4

plan, and5

‘‘(B) is in pay status under the plan or has6

a nonforfeitable right to benefits under the7

plan.8

‘‘(6) PAY STATUS.—A person is in ‘pay status’9

under a multiemployer plan if—10

‘‘(A) at any time during the current plan11

year, such person is a participant or beneficiary12

under the plan and is paid an early, late, nor-13

mal, or disability retirement benefit under the14

plan (or a death benefit under the plan related15

to a retirement benefit), or16

‘‘(B) to the extent provided in regulations17

of the Secretary, such person is entitled to such18

a benefit under the plan.19

‘‘(7) OBLIGATION TO CONTRIBUTE.—The term20

‘obligation to contribute’ has the meaning provided21

such term under section 4212(a) of the Employee22

Retirement Income Security Act of 1974.23

‘‘(8) ENTRY INTO CRITICAL STATUS.—A plan24

shall be treated as entering into critical status as of25

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303

H.L.C.

the date that such plan is certified to be in critical1

status under subsection (a)(1), is presumed to be in2

critical status under subsection (a)(3), or enters into3

critical status under subsection (b)(7).’’.4

(b) EXCISE TAX ON FAILURES TO ACT WITH RE-5

SPECT TO MULTIEMPLOYER PLANS IN CRITICAL STA-6

TUS.—Section 4971 of the Internal Revenue Code of 19867

is amended by redesignating subsection (g) as subsection8

(h) and by inserting after subsection (f) the following:9

‘‘(g) MULTIEMPLOYER PLANS IN CRITICAL STA-10

TUS.—11

‘‘(1) SUBSTITUTION OF EXCISE TAX FOR INI-12

TIAL AND ADDITIONAL TAX.—In the case of a multi-13

employer plan to which section 432(c) applies for a14

period, subsections (a) and (b) shall not apply with15

respect to such period.16

‘‘(2) FAILURE TO ADOPT REHABILITATION17

PLAN.—18

‘‘(A) IN GENERAL.—In the case of a multi-19

employer plan to which section 432(c) applies,20

there is hereby imposed a tax on the failure of21

such plan to adopt a rehabilitation plan.22

‘‘(B) AMOUNT OF TAX.—The amount of23

the tax imposed under subparagraph (A) with24

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304

H.L.C.

respect to any plan sponsor shall be the greater1

of—2

‘‘(i) the amount of tax imposed under3

subsection (a) (determined without regard4

to this subsection), or5

‘‘(ii) the amount equal to $1,100 mul-6

tiplied by the number of days in the period7

beginning on the first day of the 240-day8

period described in section 432(c)(1) and9

ending on the day on which the rehabilita-10

tion plan is adopted.11

‘‘(C) LIABILITY FOR TAX.—12

‘‘(i) IN GENERAL.—The tax imposed13

by subparagraph (A) shall be paid by each14

plan sponsor.15

‘‘(ii) PLAN SPONSOR.—For purposes16

of clause (i), the term ‘plan sponsor’ in the17

case of a multiemployer plan means the as-18

sociation, committee, joint board of trust-19

ees, or other similar group of representa-20

tives of the parties who establish or main-21

tain the plan.22

‘‘(3) FAILURE TO COMPLY WITH REHABILITA-23

TION PLAN.—24

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H.L.C.

‘‘(A) IN GENERAL.—In the case of a multi-1

employer plan to which section 432(c) applies,2

there is hereby imposed a tax on each failure to3

make a required contribution under the reha-4

bilitation plan within the time required under5

such plan.6

‘‘(B) AMOUNT OF TAX.—The amount of7

the tax imposed by subparagraph (A) shall be,8

with respect to each required contribution9

under the rehabilitation plan, the amount equal10

to the excess of the amount of such required11

contribution over the amount contributed.12

‘‘(C) LIABILITY FOR TAX.—The tax im-13

posed by subparagraph (A) shall be paid by the14

employer responsible for contributing to or15

under the rehabilitation plan which fails to16

make the contribution.17

‘‘(4) REHABILITATION PLAN.—For purposes of18

this subsection, the term ‘rehabilitation plan’ means19

the plan required to be adopted under section20

432(c).’’.21

(c) CLERICAL AMENDMENT.—The table of sections22

for subpart A of part III of subchapter D of chapter 123

of such Code is amended by adding at the end the fol-24

lowing new item:25

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306

H.L.C.

‘‘Sec. 432. Additional funding rules for multiemployer plans in endangered sta-

tus or critical status.’’.




(e) SPECIAL RULE FOR 2006.—In the case of any4

plan year beginning in 2006, any reference in section 4325

of the Internal Revenue Code of 1986 (as added by this6

section) to section 431 of such Code (as added by this7

Act) shall be treated as a reference to the corresponding8

provision of such Code as in effect for plan years begin-9

ning in such year.10

SEC. 213. MEASURES TO FORESTALL INSOLVENCY OF MUL-11

TIEMPLOYER PLANS.12

(a) ADVANCE DETERMINATION OF IMPENDING IN-13

SOLVENCY OVER 5 YEARS.—Section 418E(d)(1) of the14

Internal Revenue Code of 1986 is amended—15

(1) by striking ‘‘3 plan years’’ the second place16

it appears and inserting ‘‘5 plan years’’, and17

(2) by adding at the end the following new sen-18

tence: ‘‘If the plan sponsor makes such a determina-19

tion that the plan will be insolvent in any of the next20

5 plan years, the plan sponsor shall make the com-21

parison under this paragraph at least annually until22

the plan sponsor makes a determination that the23

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307

H.L.C.

plan will not be insolvent in any of the next 5 plan1

years.’’.2


this section shall apply with respect to determinations4

made in plan years beginning after December 31, 2005.5

TITLE III—OTHER PROVISIONS6

SEC. 301. INTEREST RATE FOR 2006 FUNDING REQUIRE-7

MENTS.8

(a) AMENDMENTS TO EMPLOYEE RETIREMENT IN-9

COME SECURITY ACT OF 1974.—10

(1) IN GENERAL.—Subclause (II) of section11

302(b)(5)(B)(ii) of the Employee Retirement Income12

Security Act of 1974 (29 U.S.C. 1082(b)(5)(B)(ii))13

is amended—14

(A) by striking ‘‘January 1, 2006’’ and in-15

serting ‘‘January 1, 2007’’, and16

(B) by striking ‘‘AND 2005’’ in the heading17

and inserting ‘‘, 2005, AND 2006’’.18

(2) CURRENT LIABILITY.—Subclause (IV) of19

section 302(d)(7)(C)(i) of such Act (29 U.S.C.20

1082(d)(7)(C)(i)) is amended—21

(A) by striking ‘‘or 2005’’ and inserting ‘‘,22

2005, or 2006’’, and23



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308

H.L.C.

(b) AMENDMENTS TO INTERNAL REVENUE CODE OF1

1986.—2

(1) IN GENERAL.—Subclause (II) of section3

412(b)(5)(B)(ii) of the Internal Revenue Code of4

1986 is amended—5

(A) by striking ‘‘January 1, 2006’’ and in-6

serting ‘‘January 1, 2007’’, and7



(2) CURRENT LIABILITY.—Subclause (IV) of10

section 412(l)(7)(C)(i) of such Code is amended—11

(A) by striking ‘‘or 2005’’ and inserting ‘‘,12

2005, or 2006’’, and13





cember 31, 2005.18

SEC. 302. INTEREST RATE ASSUMPTION FOR DETERMINA-19

TION OF LUMP SUM DISTRIBUTIONS.20

(a) AMENDMENT TO EMPLOYEE RETIREMENT IN-21

COME SECURITY ACT OF 1974.—Paragraph (3) of section22

205(g) of the Employee Retirement Income Security Act23

of 1974 (29 U.S.C. 1055(g)(3)) is amended to read as24

follows:25

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H.L.C.

‘‘(3)(A) For purposes of paragraphs (1) and (2), the1

present value shall not be less than the present value cal-2

culated by using the applicable mortality table and the ap-3

plicable interest rate.4

‘‘(B) For purposes of subparagraph (A)—5

‘‘(i) The term ‘applicable mortality table’ means6

a mortality table, modified as appropriate by the7

Secretary of the Treasury, based on the mortality8

table specified for the plan year under section9

303(h)(3).10

‘‘(ii) The term ‘applicable interest rate’ means11

the adjusted first, second, and third segment rates12

applied under rules similar to the rules of section13

303(h)(2)(C) for the month before the date of the14

distribution or such other time as the Secretary of15

the Treasury may by regulations prescribe.16

‘‘(iii) For purposes of clause (ii), the adjusted17

first, second, and third segment rates are the first,18

second, and third segment rates which would be de-19

termined under section 303(h)(2)(C) if—20

‘‘(I) section 303(h)(2)(D)(i) were applied21

by substituting ‘the yields’ for ‘a 3-year weight-22

ed average of yields’,23

‘‘(II) section 303(h)(2)(G)(i)(II) were ap-24

plied by substituting ‘section25

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310

H.L.C.

205(g)(3)(A)(ii)(II)’ for ‘section1

302(b)(5)(B)(ii)(II)’, and2

‘‘(III) the applicable percentage under sec-3

tion 303(h)(2)(G) were determined in accord-4

ance with the following table:5

‘‘In the case of plan years beginningin:

The applicablepercentage is:

2007 .............................................................. 20 percent

2008 .............................................................. 40 percent

2009 .............................................................. 60 percent

2010 .............................................................. 80 percent.’’.

(b) AMENDMENT TO INTERNAL REVENUE CODE OF6

1986.—Paragraph (3) of section 417(e) of the Internal7

Revenue Code of 1986 is amended to read as follows:8

‘‘(3) DETERMINATION OF PRESENT VALUE.—9


graphs (1) and (2), the present value shall not11

be less than the present value calculated by12

using the applicable mortality table and the ap-13

plicable interest rate.14

‘‘(B) APPLICABLE MORTALITY TABLE.—15

For purposes of subparagraph (A), the term16

‘applicable mortality table’ means a mortality17

table, modified as appropriate by the Secretary,18

based on the mortality table specified for the19

plan year under section 430(h)(3).20

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‘‘(C) APPLICABLE INTEREST RATE.—For1

purposes of subparagraph (A), the term ‘appli-2

cable interest rate’ means the adjusted first,3

second, and third segment rates applied under4

rules similar to the rules of section5

430(h)(2)(C) for the month before the date of6

the distribution or such other time as the Sec-7

retary may by regulations prescribe.8

‘‘(D) APPLICABLE SEGMENT RATES.—For9

purposes of subparagraph (C), the adjusted10

first, second, and third segment rates are the11

first, second, and third segment rates which12

would be determined under section13

430(h)(2)(C) if—14

‘‘(i) section 430(h)(2)(D)(i) were ap-15

plied by substituting ‘the yields’ for ‘a 3-16

year weighted average of yields’,17

‘‘(ii) section 430(h)(2)(G)(i)(II) were18

applied by substituting ‘section19

417(e)(3)(A)(ii)(II)’ for ‘section20

412(b)(5)(B)(ii)(II)’, and21

‘‘(iii) the applicable percentage under22

section 430(h)(2)(G) were determined in23

accordance with the following table:24

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‘‘In the case of plan years beginning in: The applicablepercentage is:

2007 ....................................................................... 20 percent

2008 ....................................................................... 40 percent

2009 ....................................................................... 60 percent

2010 ....................................................................... 80 percent.’’.




SEC. 303. INTEREST RATE ASSUMPTION FOR APPLYING4

BENEFIT LIMITATIONS TO LUMP SUM DIS-5

TRIBUTIONS.6

(a) IN GENERAL.—Clause (ii) of section7

415(b)(2)(E) of the Internal Revenue Code of 1986 is8


‘‘(ii) For purposes of adjusting any10

benefit under subparagraph (B) for any11

form of benefit subject to section12

417(e)(3), the interest rate assumption13

shall not be less than the greater of—14

‘‘(I) 5.5 percent,15

‘‘(II) the rate that provides a16

benefit of not more than 105 percent17

of the benefit that would be provided18

if the applicable interest rate (as de-19

fined in section 417(e)(3)) were the20

interest rate assumption, or21

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H.L.C.

‘‘(III) the rate specified under1

the plan.’’.2

(b) EFFECTIVE DATE.—The amendment made by3

subsection (a) shall apply to distributions made in years4

beginning after December 31, 2005.5

SEC. 304. DISTRIBUTIONS DURING WORKING RETIREMENT.6

(a) AMENDMENT TO THE EMPLOYEE RETIREMENT7

INCOME SECURITY ACT OF 1974.—Subparagraph (A) of8

section 3(2) of the Employee Retirement Income Security9

Act of 1974 (29 U.S.C. 1002(2)) is amended by adding10

at the end the following new sentence: ‘‘A distribution11

from a plan, fund, or program shall not be treated as12

made in a form other than retirement income or as a dis-13

tribution prior to termination of covered employment sole-14

ly because such distribution is made to an employee who15

has attained age 62 and who is not separated from em-16

ployment at the time of such distribution.’’.17

(b) AMENDMENT TO THE INTERNAL REVENUE CODE18

OF 1986.—Subsection (a) of section 401 of the Internal19

Revenue Code of 1986 is amended by inserting after para-20

graph (34) the following new paragraph:21

‘‘(35) DISTRIBUTIONS DURING WORKING RE-22

TIREMENT.—A trust forming part of a pension plan23

shall not be treated as failing to constitute a quali-24

fied trust under this section solely because a dis-25

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tribution is made from such trust to an employee1

who has attained age 62 and who is not separated2

from employment at the time of such distribution.’’.3


this section shall apply to distributions in plan years be-5

ginning after December 31, 2005.6

SEC. 305. OTHER AMENDMENTS RELATING TO PROHIBITED7

TRANSACTIONS.8

(a) DEFINITION OF AMOUNT INVOLVED.—Section9

502(i) of the Employee Retirement Income Security Act10

of 1974 (29 U.S.C. 1132(i)) is amended to read as follows:11

‘‘(i)(1) In the case of a transaction prohibited by sec-12

tion 406 by a party in interest with respect to a plan to13

which this part applies, the Secretary may assess a civil14

penalty against such party in interest. Except as provided15

in paragraph (2), the amount of such penalty may not ex-16

ceed 5 percent of the amount involved in each such trans-17

action for each year or part thereof during which the pro-18

hibited transaction continues.19

‘‘(2) If the transaction is not corrected (in such man-20

ner as the Secretary shall prescribe in regulations) within21

90 days after notice from the Secretary (or such longer22

period as the Secretary may permit), such penalty may23

be in an amount not more than 100 percent of the amount24

involved.25

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H.L.C.

‘‘(3) For purposes of paragraph (1)—1

‘‘(A) Except as provided in subparagraphs (C)2

and (D), the term ‘amount involved’ means, with re-3

spect to a prohibited transaction, the greater of—4

‘‘(i) the amount of money and the fair5

market value of the other property given, or6

‘‘(ii) the amount of money and the fair7

market value of the other property received.8

‘‘(B) For purposes of subparagraph (A), fair9

market value shall be determined as of the date on10

which the prohibited transaction occurs, except that11

in the case described in paragraph (2) fair market12

value shall be the highest fair market value during13

the period between the date of the transaction and14

the date of correction.15

‘‘(C) In the case of services described in sub-16

section (b)(2) or (c)(2) of section 408, the term17

‘amount involved’ means only the amount of excess18

compensation.19

‘‘(D) In the case of principal transactions pro-20

hibited under section 406(a) involving securities or21

commodities, the term ‘amount involved’ means only22

the amount received by the disqualified person in ex-23

cess of the amount such person would have received24

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in an arm’s length transaction with an unrelated1

party as of the same date.2

‘‘(E) For the purposes of this paragraph—3

‘‘(i) the term ‘security’ has the meaning4

given such term by section 475(c)(2) of the In-5

ternal Revenue Code of 1986 (without regard to6

subparagraph (F)(iii) and the last sentence7

thereof), and8

‘‘(ii) the term ‘commodity’ has the mean-9

ing given such term by section 475(e)(2) of10

such Code (without regard to subparagraph11

(D)(iii) thereof).’’.12

(b) EXEMPTION FOR BLOCK TRADING.—13

(1) AMENDMENTS TO EMPLOYEE RETIREMENT14

INCOME SECURITY ACT OF 1974.—Section 408(b) of15

such Act (29 U.S.C. 1108(b)), as amended by sec-16

tion 601, is further amended by adding at the end17

the following new paragraph:18

‘‘(15)(A) Any transaction involving the pur-19

chase or sale of securities between a plan and a20

party in interest (other than a fiduciary described in21

section 3(21)(A)(ii)) with respect to a plan if—22

‘‘(i) the transaction involves a block trade,23

‘‘(ii) at the time of the transaction, the in-24

terest of the plan (together with the interests of25

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H.L.C.

any other plans maintained by the same plan1

sponsor), does not exceed 10 percent of the ag-2

gregate size of the block trade, and3

‘‘(iii) the terms of the transaction, includ-4

ing the price, are at least as favorable to the5

plan as an arm’s length transaction.6

‘‘(B) For purposes of this paragraph, the term7

‘block trade’ includes any trade which will be allo-8

cated across two or more client accounts of a fidu-9

ciary.’’.10

(2) AMENDMENTS TO INTERNAL REVENUE11

CODE OF 1986.—12

(A) IN GENERAL.—Subsection (d) of sec-13

tion 4975 of the Internal Revenue Code of 198614

(relating to exemptions) is amended by striking15

‘‘or’’ at the end of paragraph (15), by striking16

the period at the end of paragraph (16) and in-17

serting ‘‘, or’’, and by adding at the end the fol-18


‘‘(17) any transaction involving the purchase or20

sale of securities between a plan and a party in in-21

terest (other than a fiduciary described in subsection22

(e)(3)(B)) with respect to a plan if—23

‘‘(A) the transaction involves a block trade,24

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H.L.C.

‘‘(B) at the time of the transaction, the in-1

terest of the plan (together with the interests of2

any other plans maintained by the same plan3

sponsor), does not exceed 10 percent of the ag-4

gregate size of the block trade, and5

‘‘(C) the terms of the transaction, includ-6

ing the price, are at least as favorable to the7

plan as an arm’s length transaction.8

‘‘(D) For purposes of this paragraph, the term9

‘block trade’ includes any trade which will be allo-10

cated across two or more client accounts of a fidu-11

ciary.’’.12

(B) SPECIAL RULE RELATING TO BLOCK13

TRADE.—Subsection (f) of section 4975 of such14

Code (relating to other definitions and special15

rules) is amended by adding at the end the fol-16


‘‘(8) BLOCK TRADE.—For purposes of sub-18

section (d)(17), the term ‘block trade’ includes any19

trade which will be allocated across two or more cli-20

ent accounts of a fiduciary.’’.21

(c) BONDING RELIEF.— Section 412(a) of such Act22

(29 U.S.C. 1112(a)) is amended—23

(1) by redesignating paragraph (2) as para-24

graph (3);25

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H.L.C.

(2) by striking ‘‘and’’ at the end of paragraph1

(1); and2

(3) by inserting after paragraph (1) the fol-3


‘‘(2) no bond shall be required of an entity5

which is subject to regulation as a broker or a dealer6

under section 15 of the Securities Exchange Act of7

1934 (15 U.S.C. 78a et seq.) or an entity registered8

under the Investment Advisers Act of 1940 (159

U.S.C. 80b-1 et seq.), including requirements im-10

posed by a self-regulatory organization (within the11

meaning of section 3(a)(26) of such Act (15 U.S.C.12

78c(a)(26)), or any affiliate with respect to which13

the broker or dealer agrees to be liable to the same14

extent as if they held the assets directly.’’.15

(d) EXEMPTION FOR ELECTRONIC COMMUNICATION16

NETWORK.—17

(1) IN GENERAL.—Section 408(b) of such Act18

(as amended by subsection (b)) is further amended19

by adding at the end the following:20

‘‘(16) Any transaction involving the purchase or21

sale of securities, or other property (as determined22

in regulations of the Secretary) between a plan and23

a fiduciary or a party in interest if—24

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H.L.C.

‘‘(A) the transaction is executed through1

an exchange, electronic communication network,2

alternative trading system, or similar execution3

system or trading venue subject to regulation4

and oversight by—5

‘‘(i) the applicable Federal regulating6

entity, or7

‘‘(ii) such other applicable govern-8

mental regulating agency as the Secretary9

may determine appropriate in the case of10

any fiduciary or party in interest or class11

of fiduciaries or parties in interest or any12

transaction or class of transactions,13

‘‘(B) neither the execution system nor the14

parties to the transaction take into account the15

identity of the parties in the execution of16

trades,17

‘‘(C) the transaction is effected pursuant18

to rules designed to match purchases and sales19

at the best price available through the execution20

system,21

‘‘(D) the price and compensation associ-22

ated with the purchase and sale are not greater23

than an arm’s length transaction with an unre-24

lated party,25

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321

H.L.C.

‘‘(E) if the fiduciary or party in interest1

has an ownership interest in the system or2

venue described in subparagraph (A), the sys-3

tem or venue has been authorized under the4

plan for transactions described in this para-5

graph, and6

‘‘(F) not less than 30 days prior to the ini-7

tial transaction described in this paragraph exe-8

cuted through any system or venue described in9

subparagraph (A), the plan administrator is10

provided written notice of the execution of such11

transaction through such system or venue.’’.12


by this subsection shall take effect 30 days after the14

date of the enactment of this Act.15

(e) CONFORMING ERISA’S PROHIBITED TRANS-16

ACTION PROVISION TO FERSA.—Section 408(b) of such17

Act (29 U.S.C. 1106), as amended by subsection (d), is18

further amended by adding at the end the following new19

paragraph:20

‘‘(17)(A) transactions described in subpara-21

graphs (A), (B), and (D) of section 406(a)(1) be-22

tween a plan and a party that is a party in interest23

(under section 3(14)) solely by reason of providing24

services, but only if in connection with such trans-25

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H.L.C.

action the plan receives no less, nor pays no more,1

than adequate consideration.2

‘‘(B) For purposes of this paragraph, the term3

‘adequate consideration’ means—4

‘‘(i) in the case of a security for which5

there is a generally recognized market—6

‘‘(I) the price of the security pre-7

vailing on a national securities exchange8

which is registered under section 6 of the9

Securities Exchange Act of 1934, taking10

into account factors such as the size of the11

transaction and marketability of the secu-12

rity, or13

‘‘(II) if the security is not traded on14

such a national securities exchange, a price15

not less favorable to the plan than the of-16

fering price for the security as established17

by the current bid and asked prices quoted18

by persons independent of the issuer and19

of the party in interest, taking into ac-20

count factors such as the size of the trans-21

action and marketability of the security,22

and23

‘‘(ii) in the case of an asset other than a24

security for which there is a generally recog-25

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H.L.C.

nized market, the fair market value of the asset1

as determined in good faith by a fiduciary or fi-2

duciaries in accordance with regulations pre-3

scribed by the Secretary.’’.4

(f) RELIEF FOR FOREIGN EXCHANGE TRANS-5

ACTIONS.— Section 408(b) of such Act (as amended by6

the preceding provisions of this section) is further amend-7

ed by adding at the end the following new paragraph:8

‘‘(18) Any foreign exchange transactions, be-9

tween a bank or broker-dealer, or any affiliate of ei-10

ther thereof, and a plan with respect to which the11

bank or broker-dealer, or any affiliate, is a trustee,12

custodian, fiduciary, or other party in interest, if—13

‘‘(A) the transaction is in connection with14

the purchase or sale of securities,15

‘‘(B) at the time the foreign exchange16

transaction is entered into, the terms of the17

transaction are not less favorable to the plan18

than the terms generally available in com-19

parable arm’s length foreign exchange trans-20

actions between unrelated parties, or the terms21

afforded by the bank or the broker-dealer (or22

any affiliate thereof) in comparable arm’s-23

length foreign exchange transactions involving24

unrelated parties, and25

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H.L.C.

‘‘(C) the exchange rate used by the bank1

or broker-dealer for a particular foreign ex-2

change transaction may not deviate by more3

than 3 percent from the interbank bid and4

asked rates at the time of the transaction as5

displayed on an independent service that re-6

ports rates of exchange in the foreign currency7

market for such currency.’’.8

(g) DEFINITION OF PLAN ASSET VEHICLE.—Section9

3 of such Act (29 U.S.C. 1002) is amended by adding10

at the end the following new paragraph:11

‘‘(42) the term ‘plan assets’ means plan assets as de-12

fined by such regulations as the Secretary may prescribe,13

except that under such regulations the assets of any entity14

shall not be treated as plan assets if, immediately after15

the most recent acquisition of any equity interest in the16

entity, less than 50 percent of the total value of each class17

of equity interest in the entity is held by employee benefit18

plan investors. For purposes of determinations pursuant19

to this paragraph, the value of any equity interest owned20

by a person (other than such an employee benefit plan)21

who has discretionary authority or control with respect to22

the assets of the entity or any person who provides invest-23

ment advice for a fee (direct or indirect) with respect to24

such assets, or any affiliate of such a person, shall be dis-25

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325

H.L.C.

regarded for purposes of calculating the 50 percent1

threshold. An entity shall be considered to hold plan assets2

only to the extent of the percentage of the equity interest3

owned by benefit plan investors. For purposes of this para-4

graph, the term ‘benefit plan investor’ means an employee5

benefit plan subject to this part and any plan to which6

section 4975 of the Internal Revenue Code of 1986 ap-7

plies.’’.8

SEC. 306. CORRECTION PERIOD FOR CERTAIN TRANS-9

ACTIONS INVOLVING SECURITIES AND COM-10

MODITIES.11

(a) AMENDMENT OF EMPLOYEE RETIREMENT IN-12

COME SECURITY ACT OF 1974.—Section 408(b) of the13


U.S.C. 1108(b)), as amended by sections 304 and 601,15

is further amended by adding at the end the following new16

paragraph:17

‘‘(19)(A) Except as provided in subparagraphs18

(B) and (C), a transaction described in section19

406(a) in connection with the acquisition, holding,20

or disposition of any security or commodity, if the21

transaction is corrected before the end of the correc-22

tion period.23

‘‘(B) Subparagraph (A) does not apply to any24

transaction between a plan and a plan sponsor or its25

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H.L.C.

affiliates that involves the acquisition or sale of an1

employer security (as defined in section 407(d)(1))2

or the acquisition, sale, or lease of employer real3

property (as defined in section 407(d)(2)).4

‘‘(C) In the case of any fiduciary or other party5

in interest (or any other person knowingly partici-6

pating in such transaction), subparagraph (A) does7

not apply to any transaction if, at the time the8

transaction occurs, such fiduciary or party in inter-9

est (or other person) knew (or reasonably should10

have known) that the transaction would (without re-11

gard to this paragraph) constitute a violation of sec-12

tion 406(a).13

‘‘(D) For purposes of this paragraph, the term14

‘correction period’ means, in connection with a fidu-15

ciary or party in interest (or other person knowingly16

participating in the transaction), the 14-day period17

beginning on the date on which such fiduciary or18

party in interest (or other person) discovers, or rea-19

sonably should have discovered, that the transaction20

would (without regard to this paragraph) constitute21

a violation of section 406(a).22

‘‘(E) For purposes of this paragraph—23

‘‘(i) The term ‘security’ has the meaning24

given such term by section 475(c)(2) of the In-25

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327

H.L.C.

ternal Revenue Code of 1986 (without regard to1

subparagraph (F)(iii) and the last sentence2

thereof).3

‘‘(ii) The term ‘commodity’ has the mean-4

ing given such term by section 475(e)(2) of5

such Code (without regard to subparagraph6

(D)(iii) thereof).7

‘‘(iii) The term ‘correct’ means, with re-8

spect to a transaction—9

‘‘(I) to undo the transaction to the ex-10

tent possible and in any case to make good11

to the plan or affected account any losses12

resulting from the transaction, and13

‘‘(II) to restore to the plan or affected14

account any profits made through the use15

of assets of the plan.’’.16

(b) AMENDMENT OF INTERNAL REVENUE CODE OF17

1986.—18

(1) IN GENERAL.—Subsection (d) of section19

4975 of the Internal Revenue Code of 1986 (relating20

to exemptions), as amended by this Act, is amended21

by striking ‘‘or’’ at the end of paragraph (16), by22

striking the period at the end of paragraph (17) and23

inserting ‘‘, or’’, and by adding at the end the fol-24


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H.L.C.

‘‘(18) except as provided in subsection (f)(9), a1

transaction described in subparagraph (A), (B), (C),2

or (D) of subsection (c)(1) in connection with the3

acquisition, holding, or disposition of any security or4

commodity, if the transaction is corrected before the5

end of the correction period.’’.6

(2) SPECIAL RULES RELATING TO CORRECTION7

PERIOD.—Subsection (f) of section 4975 of such8

Code (relating to other definitions and special rules),9

as amended by this Act, is amended by adding at10

the end the following new paragraph:11

‘‘(9) CORRECTION PERIOD.—12

‘‘(A) IN GENERAL.—For purposes of sub-13

section (d)(18), the term ‘correction period’14

means the 14-day period beginning on the date15

on which the disqualified person discovers, or16

reasonably should have discovered, that the17

transaction would (without regard to this para-18

graph and subsection (d)(18)) constitute a pro-19

hibited transaction.20

‘‘(B) EXCEPTIONS.—21

‘‘(i) EMPLOYER SECURITIES.—Sub-22

section (d)(18) does not apply to any23

transaction between a plan and a plan24

sponsor or its affiliates that involves the25

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H.L.C.

acquisition or sale of an employer security1

(as defined in section 407(d)(1)) or the ac-2

quisition, sale, or lease of employer real3

property (as defined in section 407(d)(2)).4

‘‘(ii) KNOWING PROHIBITED TRANS-5

ACTION.—In the case of any disqualified6

person, subsection (d)(18) does not apply7

to a transaction if, at the time the trans-8

action is entered into, the disqualified per-9

son knew (or reasonably should have10

known) that the transaction would (with-11

out regard to this paragraph) constitute a12

prohibited transaction.13

‘‘(C) ABATEMENT OF TAX WHERE THERE14

IS A CORRECTION.—If a transaction is not15

treated as a prohibited transaction by reason of16

subsection (d)(18), then no tax under sub-17

section (a) and (b) shall be assessed with re-18

spect to such transaction, and if assessed the19

assessment shall be abated, and if collected20

shall be credited or refunded as an overpay-21

ment.22

‘‘(D) DEFINITIONS.—For purposes of this23

paragraph and subsection (d)(18)—24

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‘‘(i) SECURITY.—The term ‘security’1

has the meaning given such term by sec-2

tion 475(c)(2) (without regard to subpara-3

graph (F)(iii) and the last sentence there-4

of).5

‘‘(ii) COMMODITY.—The term ‘com-6

modity’ has the meaning given such term7

by section 475(e)(2) (without regard to8

subparagraph (D)(iii) thereof).9

‘‘(iii) CORRECT.—The term ‘correct’10

means, with respect to a transaction—11

‘‘(I) to undo the transaction to12

the extent possible and in any case to13

make good to the plan or affected ac-14

count any losses resulting from the15

transaction, and16

‘‘(II) to restore to the plan or af-17

fected account any profits made18

through the use of assets of the19

plan.’’.20


this section shall apply to any transaction which the fidu-22

ciary or disqualified person discovers, or reasonably should23

have discovered, after the date of the enactment of this24

Act constitutes a prohibited transaction.25

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SEC. 307. RECOVERY BY REIMBURSEMENT OR SUBROGA-1

TION WITH RESPECT TO PROVIDED BENE-2

FITS.3

(a) IN GENERAL.—Section 502(a) of the Employee4

Retirement Income Security Act of 1974 (29 U.S.C.5

1132(a)) is amended by adding, after and below para-6

graph (9), the following new sentence:7

‘‘Actions described under paragraph (3) include an action8

by a fiduciary for recovery of amounts on behalf of the9

plan enforcing terms of the plan that provide a right of10

recovery by reimbursement or subrogation with respect to11

benefits provided to or for a participant or beneficiary.’’.12


subsection (a) shall take effect on January 1, 2006.14

SEC. 308. EXERCISE OF CONTROL OVER PLAN ASSETS IN15

CONNECTION WITH QUALIFIED CHANGES IN16

INVESTMENT OPTIONS.17

(a) IN GENERAL.—Section 404(c) of the Employee18


1104(c)) is amended by adding at the end the following20

new paragraph:21

‘‘(4)(A) In any case in which a qualified change in22

investment options occurs in connection with an individual23

account plan, a participant or beneficiary shall not be24

treated for purposes of paragraph (1) as not exercising25

control over the assets in his account in connection with26

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such change if the requirements of subparagraph (C) are1

met in connection with such change.2

‘‘(B) For purposes of subparagraph (A), the term3

‘qualified change in investment options’ means, in connec-4

tion with an individual account plan, a change in the in-5

vestment options offered to the participant or beneficiary6

under the terms of the plan, under which—7

‘‘(i) the participant’s account is reallocated8

among one or more new investment options which9

are offered in lieu of one or more investment options10

offered immediately prior to the effective date of the11

change, and12

‘‘(ii) the characteristics of the new investment13

options, including characteristics relating to risk and14

rate of return, are, as of immediately after the15

change, reasonably similar to those of the existing16

investment options as of immediately before the17

change.18

‘‘(C) The requirements of this subparagraph are met19

in connection with a qualified change in investment op-20

tions if—21

‘‘(i) at least 60 days prior to the effective date22

of the change, the plan administrator furnishes writ-23

ten notice of the change to the participants and24

beneficiaries, including information comparing the25

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existing and new investment options and an expla-1

nation that, in the absence of affirmative investment2

instructions from the participant or beneficiary to3

the contrary, the account of the participant or bene-4

ficiary will be invested in the manner described in5

subparagraph (B),6

‘‘(ii) the participant has not provided to the7

plan administrator, in advance of the effective date8

of the change, affirmative investment instructions9

contrary to the change, and10

‘‘(iii) the investments under the plan of the par-11

ticipant or beneficiary as in effect immediately prior12

to the effective date of the change was the product13

of the exercise by such participant or beneficiary of14

control over the assets of the account within the15

meaning of paragraph (1).’’.16


subsection (a) shall apply with respect to changes in in-18

vestment options taking effect on or after January 1,19

2006.20

SEC. 309. CLARIFICATION OF FIDUCIARY RULES.21

Not later than 1 year after the date of the enactment22

of this Act, the Secretary of Labor shall issue final regula-23

tions clarifying that the selection of an annuity contract24

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H.L.C.

as an optional form of distribution from an individual ac-1

count plan to a participant or beneficiary—2

(1) is not subject to the safest available annuity3

standard under Interpretive Bulletin 95–1 (294

C.F.R. 2509.95–1), and5

(2) is subject to all otherwise applicable fidu-6

ciary standards.7

SEC. 310. GOVERNMENT ACCOUNTABILITY OFFICE PEN-8

SION FUNDING REPORT.9

(a) IN GENERAL.—The Comptroller General of the10

Government Accountability Office shall transmit to the11

Congress a pension funding report not later than one year12

after the date of the enactment of this Act.13

(b) REPORT CONTENT.—The pension funding report14

required under subsection (a) shall include an analysis of15

the feasibility, advantages, and disadvantages of—16

(1) requiring an employee pension benefit plan17

to insure a portion of such plan’s total investments;18

(2) requiring an employee pension benefit plan19

to adhere to uniform solvency standards set by the20

Pension Benefit Guaranty Corporation, which are21

similar to those applied on a State level in the insur-22

ance industry; and23

(3) amortizing a single-employer defined benefit24

pension plan’s shortfall amortization base (referred25

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H.L.C.

to in section 303(c)(3) of the Employee Retirement1

Income Security Act of 1974 (as amended by this2

Act)) over various periods of not more than 7 years.3

TITLE IV—IMPROVEMENTS IN4

PBGC GUARANTEE PROVISIONS5

SEC. 401. INCREASES IN PBGC PREMIUMS.6

(a) FLAT-RATE PREMIUMS.—Section 4006(a)(3) of7

the Employee Retirement Income Security Act of 19748

(29 U.S.C. 1306(a)(3)) is amended—9

(1) by striking clause (i) of subparagraph (A)10

and inserting the following:11

‘‘(i) in the case of a single-employer plan, an12

amount equal to—13

‘‘(I) for plan years beginning after Decem-14

ber 31, 1990, and before January 1, 2006, $19,15

or16

‘‘(II) for plan years beginning after De-17

cember 31, 2005, the amount determined under18

subparagraph (F),19

plus the additional premium (if any) determined20

under subparagraph (E) for each individual who is21

a participant in such plan during the plan year;’’;22

and23

(2) by adding at the end the following new sub-24

paragraph:25

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‘‘(F)(i) Except as otherwise provided in this subpara-1

graph, for purposes of determining the annual premium2

rate payable to the corporation by a single-employer plan3

for basic benefits guaranteed under this title, the amount4

determined under this subparagraph is the greater of $305

or the adjusted amount determined under clause (ii).6

‘‘(ii) For plan years beginning after 2006, the ad-7

justed amount determined under this clause is the product8

derived by multiplying $30 by the ratio of—9

‘‘(I) the national average wage index (as de-10

fined in section 209(k)(1) of the Social Security Act)11

for the first of the 2 calendar years preceding the12

calendar year in which the plan year begins, to13

‘‘(II) the national average wage index (as so de-14

fined) for 2004,15

with such product, if not a multiple of $1, being rounded16

to the next higher multiple of $1 where such product is17

a multiple of $0.50 but not of $1, and to the nearest mul-18

tiple of $1 in any other case.19

‘‘(iii) For purposes of determining the annual pre-20

mium rate payable to the corporation by a single-employer21

plan for basic benefits guaranteed under this title for any22

plan year beginning after 2005 and before 2010—23

‘‘(I) except as provided in subclause (II), the24

premium amount referred to in subparagraph25

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(A)(i)(II) for any such plan year is the amount set1

forth in connection with such plan year in the fol-2

lowing table:3

‘‘If the plan year begins in: The amount is:2006 ....................................................................... $21.20

2007 ....................................................................... $23.40

2008 ....................................................................... $25.60

2009 ....................................................................... $27.80; or

‘‘(II) if the plan’s funding target attainment4

percentage for the plan year preceding the current5

plan year was less than 80 percent, the premium6

amount referred to in subparagraph (A)(i)(II) for7

such current plan year is the amount set forth in8

connection with such current plan year in the fol-9

lowing table:10

‘‘If the plan year begins in: The amount is:2006 ....................................................................... $22.67

2007 ....................................................................... $26.33

2008 or 2009 .......................................................... the amount provided

under clause (i).

‘‘(iv) For purposes of this subparagraph, the term11

‘funding target attainment percentage’ has the meaning12

provided such term in section 303(d)(2).’’.13

(b) PREMIUM RATE FOR CERTAIN TERMINATED SIN-14

GLE-EMPLOYER PLANS.—Subsection (a) of section 400615

of such Act (29 U.S.C. 1306) is amended by adding at16

the end the following:17

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H.L.C.

‘‘(7) PREMIUM RATE FOR CERTAIN TERMINATED1

SINGLE-EMPLOYER PLANS.—2

‘‘(A) IN GENERAL.—If there is a termination of3

a single-employer plan under clause (ii) or (iii) of4

section 4041(c)(2)(B) or section 4042, there shall be5

payable to the corporation, with respect to each ap-6

plicable 12-month period, a premium at a rate equal7

to $1,250 multiplied by the number of individuals8

who were participants in the plan immediately before9

the termination date. Such premium shall be in ad-10

dition to any other premium under this section.11

‘‘(B) SPECIAL RULE FOR PLANS TERMINATED12

IN BANKRUPTCY REORGANIZATION.—If the plan is13

terminated under 4041(c)(2)(B)(ii) or under section14

4042 and, as of the termination date, a person who15

is (as of such date) a contributing sponsor of the16

plan or a member of such sponsor’s controlled group17

has filed or has had filed against such person a peti-18

tion seeking reorganization in a case under title 1119

of the United States Code, or under any similar law20

of a State or a political subdivision of a State (or21

a case described in section 4041(c)(2)(B)(i) filed by22

or against such person has been converted, as of23

such date, to such a case in which reorganization is24

sought), subparagraph (A) shall not apply to such25

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339

H.L.C.

plan until the date of the discharge of such person1

in such case.2

‘‘(C) APPLICABLE 12-MONTH PERIOD.—For3

purposes of subparagraph (A)—4

‘‘(i) IN GENERAL.—The term ‘applicable5

12-month period’ means—6

‘‘(I) the 12-month period beginning7

with the first month following the month8

in which the termination date occurs, and9

‘‘(II) each of the first two 12-month10

periods immediately following the period11

described in subclause (I).12

‘‘(ii) PLANS TERMINATED IN BANKRUPTCY13

REORGANIZATION.—In any case in which the14

requirements of subparagraph (B) are met in15

connection with the termination of the plan16

with respect to 1 or more persons described in17

such subparagraph, the 12-month period de-18

scribed in clause (i)(I) shall be the 12-month19

period beginning with the first month following20

the month which includes the earliest date as of21

which each such person is discharged in the22

case described in such clause in connection with23

such person.24

‘‘(D) COORDINATION WITH SECTION 4007.—25

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H.L.C.

‘‘(i) Notwithstanding section 4007—1

‘‘(I) premiums under this paragraph2

shall be due within 30 days after the be-3

ginning of any applicable 12-month period,4

and5

‘‘(II) the designated payor shall be the6

person who is the contributing sponsor as7

of immediately before the termination date.8

‘‘(ii) The fifth sentence of section 4007(a)9

shall not apply in connection with premiums de-10

termined under this paragraph.’’.11

(c) RISK-BASED PREMIUMS.—12

(1) EXTENSION THROUGH 2006.—Section13

4006(a)(3)(E)(iii)(V) of such Act is amended by14

striking ‘‘January 1, 2006’’ and inserting ‘‘January15

1, 2007’’.16

(2) CONFORMING AMENDMENTS RELATED TO17

FUNDING RULES FOR SINGLE-EMPLOYER PLANS.—18

Section 4006(a)(3)(E) of such Act is amended by19

striking clauses (iii) and (iv) and inserting the fol-20

lowing:21

‘‘(iii)(I) For purposes of clause (ii), except as pro-22

vided in subclause (II), the term ‘unfunded vested bene-23

fits’ means, for a plan year, the amount which would be24

the plan’s funding shortfall (as defined in section25

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341

H.L.C.

303(c)(4)), if the value of plan assets of the plan were1

equal to the fair market value of such assets and only vest-2

ed benefits were taken into account.3

‘‘(II) The interest rate used in valuing vested benefits4

for purposes of subclause (I) shall be equal to the first,5

second, or third segment rate which would be determined6

under section 303(h)(2)(C) if section 303(h)(2)(D)(i) were7

applied by substituting ‘the yields’ for ‘the 3-year weighted8

average of yields’, as applicable under rules similar to the9

rules under section 303(h)(2)(B).’’.10

(d) EFFECTIVE DATES.—11

(1) IN GENERAL.—The amendments made by12

subsection (a) and (c)(1) shall apply to plan years13


(2) PREMIUM RATE FOR CERTAIN TERMINATED15

SINGLE-EMPLOYER PLANS.—The amendment made16

by subsection (b) shall apply with respect to cases17

commenced under title 11, United States Code, or18

under any similar law of a State or political subdivi-19

sion of a State after October 26, 2005.20

(3) CONFORMING AMENDMENTS RELATED TO21

FUNDING RULES FOR SINGLE-EMPLOYER PLANS.—22

The amendments made by subsection (c)(2) shall23

take effect on December 31, 2006, and shall apply24

to plan years beginning after such date.25

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H.L.C.

TITLE V—DISCLOSURE1

SEC. 501. DEFINED BENEFIT PLAN FUNDING NOTICES.2

(a) APPLICATION OF PLAN FUNDING NOTICE RE-3

QUIREMENTS TO ALL DEFINED BENEFIT PLANS.—Sec-4

tion 101(f) of the Employee Retirement Income Security5

Act of 1974 (29 U.S.C. 1021(f)) is amended—6

(1) in the heading, by striking ‘‘MULTIEM-7

PLOYER’’;8

(2) in paragraph (1), by striking ‘‘which is a9

multiemployer plan’’; and10

(3) by striking paragraph (2)(B)(iii) and insert-11

ing the following:12

‘‘(iii)(I) in the case of a single-em-13

ployer plan, a summary of the rules gov-14

erning termination of single-employer plans15

under subtitle C of title IV, or16

‘‘(II) in the case of a multiemployer17

plan, a summary of the rules governing in-18

solvent multiemployer plans, including the19

limitations on benefit payments and any20

potential benefit reductions and suspen-21

sions (and the potential effects of such lim-22

itations, reductions, and suspensions on23

the plan); and’’.24

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H.L.C.

(b) INCLUSION OF STATEMENT OF THE RATIO OF IN-1

ACTIVE PARTICIPANTS TO ACTIVE PARTICIPANTS.—Sec-2

tion 101(f)(2)(B) of such Act (29 U.S.C. 1021(f)(2)(B))3

is amended—4

(1) in clause (iii)(II) (added by subsection5

(a)(3) of this section), by striking ‘‘and’’ at the end;6

(2) in clause (iv), by striking ‘‘apply.’’ and in-7

serting ‘‘apply; and’’; and8

(3) by adding at the end the following new9

clause:10

‘‘(v) a statement of the ratio, as of11

the end of the plan year to which the no-12

tice relates, of—13

‘‘(I) the number of participants14

who are not in covered service under15

the plan and are in pay status under16

the plan or have a nonforfeitable right17

to benefits under the plan, to18

‘‘(II) the number of participants19

who are in covered service under the20

plan.’’.21

(c) COMPARISON OF MONTHLY AVERAGE OF VALUE22

OF PLAN ASSETS TO PROJECTED CURRENT LIABIL-23

ITIES.—Section 101(f)(2)(B) of such Act (29 U.S.C.24

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H.L.C.

1021(f)(2)(B)) (as amended by the preceding provisions1

of this section) is amended further—2

(1) by striking clause (ii) and inserting the fol-3

lowing:4

‘‘(ii) a statement of a reasonable esti-5

mate of—6

‘‘(I) the value of the plan’s assets7

for the plan year to which the notice8

relates,9

‘‘(II) projected liabilities of the10

plan for the plan year to which the11

notice relates, and12

‘‘(III) the ratio of the estimated13


(I) to the estimated amount deter-15

mined under subclause (II);’’; and16

(2) by adding at the end (after and below17

clause (v)) the following:18

‘‘For purposes of determining a plan’s projected19

liabilities for a plan year under clause (ii)(II),20

such projected liabilities shall be determined by21

projecting forward in a reasonable manner to22

the end of the plan year the liabilities of the23

plan to participants and beneficiaries as of the24

first day of the plan year, taking into account25

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345

H.L.C.

any significant events that occur during the1

plan year and that have a material effect on2

such liabilities, including any plan amendments3

in effect for the plan year.’’.4

(d) STATEMENT OF PLAN’S FUNDING POLICY AND5

METHOD OF ASSET ALLOCATION.—Section 101(f)(2)(B)6

of such Act (as amended by the preceding provisions of7

this section) is amended further—8

(1) in clause (iv), by striking ‘‘and’’ at the end;9

(2) in clause (v), by striking the period and in-10

serting ‘‘; and’’; and11

(3) by inserting after clause (v) the following12

new clause:13

‘‘(vi) a statement setting forth the14

funding policy of the plan and the asset al-15

location of investments under the plan (ex-16

pressed as percentages of total assets) as17

of the end of the plan year to which the18

notice relates.’’.19

(e) NOTICE OF FUNDING IMPROVEMENT PLAN OR20

REHABILITATION PLAN ADOPTED BY MULTIEMPLOYER21

PLAN.—Section 101(f)(2)(B) of such Act (as amended by22

the preceding provisions of this section) is amended23

further—24

(1) in clause (v), by striking ‘‘and’’ at the end;25

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H.L.C.

(2) in clause (vi), by striking the period and in-1

serting ‘‘; and’’; and2

(3) by inserting after clause (vi) the following3

new clause:4

‘‘(vii) a summary of any funding im-5

provement plan, rehabilitation plan, or6

modification thereof adopted under section7

305 during the plan year to which the no-8

tice relates.’’.9

(f) NOTICE DUE 90 DAYS AFTER PLAN’S VALU-10

ATION DATE.—11

(1) IN GENERAL.—Section 101(f)(3) of such12

Act (29 U.S.C. 1021(f)(3)) is amended by striking13

‘‘two months after the deadline (including exten-14

sions) for filing the annual report for the plan year’’15

and inserting ‘‘90 days after the end of the plan16

year’’.17

(2) MODEL NOTICE.—Not later than 180 days18

after the date of the enactment of this Act, the Sec-19

retary of Labor shall publish a model version of the20

notice required by section 101(f) of the Employee21

Retirement Income Security Act of 1974.22



cember 31, 2005.25

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H.L.C.

SEC. 502. ADDITIONAL DISCLOSURE REQUIREMENTS.1

(a) ADDITIONAL ANNUAL REPORTING REQUIRE-2

MENTS.—Section 103 of the Employee Retirement Income3

Security Act of 1974 (29 U.S.C. 1023) is amended—4

(1) in subsection (a)(1)(B), by striking ‘‘sub-5

sections (d) and (e)’’ and inserting ‘‘subsections (d),6

(e), and (f)’’; and7

(2) by adding at the end the following new sub-8

section:9

‘‘(f)(1) With respect to any defined benefit plan, an10

annual report under this section for a plan year shall in-11

clude the following:12

‘‘(A) The ratio, as of the end of such plan year,13

of—14

‘‘(i) the number of participants who, as of15

the end of such plan year, are not in covered16

service under the plan and are in pay status17

under the plan or have a nonforfeitable right to18

benefits under the plan, to19

‘‘(ii) the number of participants who are in20

covered service under the plan as of the end of21

such plan year.22

‘‘(B) In any case in which any liabilities to par-23

ticipants or their beneficiaries under such plan as of24

the end of such plan year consist (in whole or in25

part) of liabilities to such participants and bene-26

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348

H.L.C.

ficiaries borne by 2 or more pension plans as of im-1

mediately before such plan year, the funded ratio of2

each of such 2 or more pension plans as of imme-3

diately before such plan year and the funded ratio4

of the plan with respect to which the annual report5

is filed as of the end of such plan year.6

‘‘(C) For purposes of this paragraph, the term7

‘funded ratio’ means, in connection with a plan, the8

percentage which—9

‘‘(i) the value of the plan’s assets is of10

‘‘(ii) the liabilities to participants and11

beneficiaries under the plan.12

‘‘(2) With respect to any defined benefit plan which13

is a multiemployer plan, an annual report under this sec-14

tion for a plan year shall include the following:15

‘‘(A) The number of employers obligated to con-16

tribute to the plan as of the end of such plan year.17

‘‘(B) The number of participants under the18

plan on whose behalf no employer contributions have19

been made to the plan for such plan year. For pur-20

poses of this subparagraph, the term ‘employer con-21

tribution’ means, in connection with a participant, a22

contribution made by an employer as an employer of23

such participant.’’.24

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H.L.C.

(b) ADDITIONAL INFORMATION IN ANNUAL ACTU-1

ARIAL STATEMENT REGARDING PLAN RETIREMENT PRO-2

JECTIONS.—Section 103(d) of such Act (29 U.S.C.3

1023(d)) is amended—4

(1) by redesignating paragraphs (12) and (13)5

as paragraphs (13) and (14), respectively; and6

(2) by inserting after paragraph (11) the fol-7


‘‘(12) A statement explaining the actuarial as-9

sumptions and methods used in projecting future re-10

tirements and forms of benefit distributions under11

the plan.’’.12

(c) FILING AFTER 285 DAYS AFTER PLAN YEAR13

ONLY IN CASES OF HARDSHIP.—Section 104(a)(1) of14

such Act (29 U.S.C. 1024(a)(1)) is amended by inserting15

after the first sentence the following new sentence: ‘‘In16

the case of a pension plan, the Secretary may extend the17

deadline for filing the annual report for any plan year past18

285 days after the close of the plan year only on a case19

by case basis and only in cases of hardship, in accordance20

with regulations which shall be prescribed by the Sec-21

retary.’’.22

(d) INTERNET DISPLAY OF INFORMATION.—Section23

104(b) of such Act (29 U.S.C. 1024(b)) is amended by24

adding at the end the following:25

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H.L.C.

‘‘(5) Identification and basic plan information and ac-1

tuarial information included in the annual report for any2

plan year shall be filed with the Secretary in an electronic3

format which accommodates display on the Internet, in ac-4

cordance with regulations which shall be prescribed by the5

Secretary. The Secretary shall provide for display of such6

information included in the annual report, within 90 days7

after the date of the filing of the annual report, on a8

website maintained by the Secretary on the Internet and9

other appropriate media. Such information shall also be10

displayed on any website maintained by the plan sponsor11

(or by the plan administrator on behalf of the plan spon-12

sor) on the Internet, in accordance with regulations which13

shall be prescribed by the Secretary.’’.14

(e) SUMMARY ANNUAL REPORT FILED WITHIN 1515

DAYS AFTER DEADLINE FOR FILING OF ANNUAL RE-16

PORT.—Section 104(b)(3) of such Act (29 U.S.C.17

1024(b)(3)) is amended—18

(1) by striking ‘‘Within 210 days after the close19

of the fiscal year of the plan,’’ and inserting ‘‘Within20

15 business days after the due date under subsection21

(a)(1) for the filing of the annual report for the fis-22

cal year of the plan,’’; and23

(2) by striking ‘‘the latest’’ and inserting24

‘‘such’’.25

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351

H.L.C.

(f) DISCLOSURE OF PLAN ASSETS AND LIABILITIES1

IN SUMMARY ANNUAL REPORT.—2

(1) IN GENERAL.—Section 104(b)(3) of such3

Act (as amended by subsection (a)) is amended4

further—5

(A) by inserting ‘‘(A)’’ after ‘‘(3)’’; and6

(B) by adding at the end the following:7

‘‘(B) The material provided pursuant to subpara-8

graph (A) to summarize the latest annual report shall be9

written in a manner calculated to be understood by the10

average plan participant and shall set forth the total as-11

sets and liabilities of the plan for the plan year for which12

the latest annual report was filed and for each of the 213

preceding plan years, as reported in the annual report for14

each such plan year under this section.’’.15

(g) INFORMATION MADE AVAILABLE TO PARTICI-16

PANTS, BENEFICIARIES, AND EMPLOYERS WITH RESPECT17

TO MULTIEMPLOYER PLANS.—18

(1) IN GENERAL.—Section 101 of the Employee19


1021) (as amended by section 103(b)(2)(A)) is fur-21

ther amended—22

(A) by redesignating subsection (k) as sub-23

section (l); and24

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(B) by inserting after subsection (j) the1

following new subsection:2

‘‘(k) MULTIEMPLOYER PLAN INFORMATION MADE3

AVAILABLE ON REQUEST.—4

‘‘(1) IN GENERAL.—Each administrator of a5

multiemployer plan shall furnish to any plan partici-6

pant or beneficiary or any employer having an obli-7

gation to contribute to the plan, who so requests in8

writing—9

‘‘(A) a copy of any actuarial report re-10

ceived by the plan for any plan year which has11

been in receipt by the plan for at least 30 days,12

and13

‘‘(B) a copy of any financial report pre-14

pared for the plan by any plan investment man-15

ager or advisor or other person who is a plan16

fiduciary which has been in receipt by the plan17

for at least 30 days.18

‘‘(2) COMPLIANCE.—Information required to be19

provided under paragraph (1) —20

‘‘(A) shall be provided to the requesting21

participant, beneficiary, or employer within 3022

days after the request in a form and manner23

prescribed in regulations of the Secretary, and24

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‘‘(B) may be provided in written, elec-1

tronic, or other appropriate form to the extent2

such form is reasonably accessible to persons to3

whom the information is required to be pro-4

vided.5

‘‘(3) LIMITATIONS.—In no case shall a partici-6

pant, beneficiary, or employer be entitled under this7

subsection to receive more than one copy of any re-8

port described in paragraph (1) during any one 12-9

month period. The administrator may make a rea-10

sonable charge to cover copying, mailing, and other11

costs of furnishing copies of information pursuant to12

paragraph (1). The Secretary may by regulations13

prescribe the maximum amount which will constitute14

a reasonable charge under the preceding sentence.’’.15

(2) ENFORCEMENT.—Section 502(c)(4) of such16

Act (29 U.S.C. 1132(c)(4)) (as amended by section17

103(b)(2)(B)) is further amended by striking ‘‘sec-18

tions 101(j) and 302(b)(7)(F)(iv)’’ and inserting19

‘‘sections 101(j), 101(k), and 302(b)(7)(F)(iv)’’.20

(3) REGULATIONS.—The Secretary shall pre-21

scribe regulations under section 101(k)(2) of the22

Employee Retirement Income Security Act of 197423

(added by paragraph (1) of this subsection) not later24

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than 90 days after the date of the enactment of this1

Act.2

(h) NOTICE OF POTENTIAL WITHDRAWAL LIABILITY3

TO MULTIEMPLOYER PLANS.—4

(1) IN GENERAL.—Section 101 of such Act (as5

amended by subsection (g) of this section) is further6

amended—7

(A) by redesignating subsection (l) as sub-8

section (m); and9

(B) by inserting after subsection (k) the10


‘‘(l) NOTICE OF POTENTIAL WITHDRAWAL LIABIL-12

ITY.—13

‘‘(1) IN GENERAL.—The plan sponsor or ad-14

ministrator of a multiemployer plan shall furnish to15

any employer who has an obligation to contribute16

under the plan and who so requests in writing notice17

of—18

‘‘(A) the amount which would be the19

amount of such employer’s withdrawal liability20

under part 1 of subtitle E of title IV if such21

employer withdrew on the last day of the plan22

year preceding the date of the request, and23

‘‘(B) the average increase, per participant24

under the plan, in accrued liabilities under the25

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H.L.C.

plan as of the end of such plan year to partici-1

pants under such plan on whose behalf no em-2

ployer contributions are payable (or their bene-3

ficiaries), which would be attributable to such a4

withdrawal by such employer.5

For purposes of subparagraph (B), the term ‘em-6

ployer contribution’ means, in connection with a par-7

ticipant, a contribution made by an employer as an8

employer of such participant.9

‘‘(2) COMPLIANCE.—Any notice required to be10

provided under paragraph (1)—11

‘‘(A) shall be provided to the requesting12

employer within 180 days after the request in13

a form and manner prescribed in regulations of14

the Secretary, and15

‘‘(B) may be provided in written, elec-16

tronic, or other appropriate form to the extent17

such form is reasonably accessible to employers18

to whom the information is required to be pro-19

vided.20

‘‘(3) LIMITATIONS.—In no case shall an em-21

ployer be entitled under this subsection to receive22

more than one notice described in paragraph (1)23

during any one 12-month period. The person re-24

quired to provide such notice may make a reasonable25

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H.L.C.

charge to cover copying, mailing, and other costs of1

furnishing such notice pursuant to paragraph (1).2

The Secretary may by regulations prescribe the max-3

imum amount which will constitute a reasonable4

charge under the preceding sentence.’’.5

(2) ENFORCEMENT.—Section 502(c)(4) of such6

Act (29 U.S.C. 1132(c)(4)) (as amended by para-7

graph (1)) is further amended by striking ‘‘sections8

101(j), 101(k), and 302(b)(7)(F)(iv)’’ and inserting9

‘‘sections 101(j), 101(k), 101(l), and10

302(b)(7)(F)(iv)’’.11

(i) MODEL FORM.—Not later than 180 days after the12

date of the enactment of this Act, the Secretary of Labor13

shall publish a model form for providing the statements,14

schedules, and other material required to be provided15

under section 104(b)(3) of the Employee Retirement In-16

come Security Act of 1974, as amended by this section.17

(j) EFFECTIVE DATE.—The amendments made by18


cember 31, 2005.20

SEC. 503. SECTION 4010 FILINGS WITH THE PBGC.21

(a) CHANGE IN CRITERIA FOR PERSONS REQUIRED22

TO PROVIDE INFORMATION TO PBGC.—Section 4010(b)23

of the Employee Retirement Income Security Act of 197424

(29 U.S.C. 1310(b)) is amended by striking paragraph25

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H.L.C.

(1), by redesignating paragraphs (2) and (3) as para-1

graphs (3) and (4), respectively, and by inserting before2

paragraph (3) (as so redesignated) the following new para-3

graphs:4

‘‘(1) the aggregate funding target attainment5

percentage of the plan (as defined in subsection6

(d)(2)) is less than 60 percent;7

‘‘(2)(A) the aggregate funding target attain-8

ment percentage of the plan (as defined in sub-9

section (d)(2)) is less than 75 percent, and10

‘‘(B) the plan sponsor is in an industry with re-11

spect to which the corporation determines that there12

is substantial unemployment or underemployment13

and the sales and profits are depressed or declin-14

ing;’’.15

(b) NOTICE TO PARTICIPANTS AND BENE-16

FICIARIES.—Section 4010 of the Employee Retirement In-17

come Security Act of 1974 (29 U.S.C. 1310) is amended18

by adding at the end the following new subsection:19

‘‘(d) NOTICE TO PARTICIPANTS AND BENE-20

FICIARIES.—21

‘‘(1) IN GENERAL.—Not later than 90 days22

after the submission by any person to the corpora-23

tion of information or documentary material with re-24

spect to any plan pursuant to subsection (a), such25

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H.L.C.

person shall provide notice of such submission to1

each participant and beneficiary under the plan (and2

under all plans maintained by members of the con-3

trolled group of each contributing sponsor of the4

plan). Such notice shall also set forth—5

‘‘(A) the number of single-employer plans6

covered by this title which are in at-risk status7

and are maintained by contributing sponsors of8

such plan (and by members of their controlled9

groups) with respect to which the funding tar-10

get attainment percentage for the preceding11

plan year of each plan is less than 60 percent;12

‘‘(B) the value of the assets of each of the13

plans described in subparagraph (A) for the14

plan year, the funding target for each of such15

plans for the plan year, and the funding target16

attainment percentage of each of such plans for17

the plan year; and18

‘‘(C) taking into account all single-em-19

ployer plans maintained by the contributing20

sponsor and the members of its controlled21

group as of the end of such plan year—22

‘‘(i) the aggregate total of the values23

of plan assets of such plans as of the end24

of such plan year,25

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H.L.C.

‘‘(ii) the aggregate total of the fund-1

ing targets of such plans, as of the end of2

such plan year, taking into account only3

benefits to which participants and bene-4

ficiaries have a nonforfeitable right, and5

‘‘(iii) the aggregate funding targets6

attainment percentage with respect to the7

contributing sponsor for the preceding plan8

year.9


subsection—11

‘‘(A) VALUE OF PLAN ASSETS.—The term12

‘value of plan assets’ means the value of plan13

assets, as determined under section 303(g)(3).14

‘‘(B) FUNDING TARGET.—The term ‘fund-15

ing target’ has the meaning provided under sec-16

tion 303(d)(1).17

‘‘(C) FUNDING TARGET ATTAINMENT PER-18

CENTAGE.—The term ‘funding target attain-19

ment percentage’ has the meaning provided in20

section 303(d)(2).21

‘‘(D) AGGREGATE FUNDING TARGETS AT-22

TAINMENT PERCENTAGE.—The term ‘aggregate23

funding targets attainment percentage’ with re-24

spect to a contributing sponsor for a plan year25

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H.L.C.

is the percentage, taking into account all plans1

maintained by the contributing sponsor and the2

members of its controlled group as of the end3

of such plan year, which4

‘‘(i) the aggregate total of the values5

of plan assets, as of the end of such plan6

year, of such plans, is of7

‘‘(ii) the aggregate total of the fund-8

ing targets of such plans, as of the end of9

such plan year, taking into account only10

benefits to which participants and bene-11

ficiaries have a nonforfeitable right.12

‘‘(E) AT-RISK STATUS.—The term ‘at-risk13

status’ has the meaning provided in section14

303(i)(3).15

‘‘(3) COMPLIANCE.—16

‘‘(A) IN GENERAL.—Any notice required to17

be provided under paragraph (1) may be pro-18

vided in written, electronic, or other appropriate19

form to the extent such form is reasonably ac-20

cessible to individuals to whom the information21

is required to be provided.22

‘‘(B) LIMITATIONS.—In no case shall a23

participant or beneficiary be entitled under this24

subsection to receive more than one notice de-25

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361

H.L.C.

scribed in paragraph (1) during any one 12-1

month period. The person required to provide2

such notice may make a reasonable charge to3

cover copying, mailing, and other costs of fur-4

nishing such notice pursuant to paragraph (1).5

The corporation may by regulations prescribe6

the maximum amount which will constitute a7

reasonable charge under the preceding sentence.8

‘‘(4) NOTICE TO CONGRESS.—Concurrent with9

the provision of any notice under paragraph (1),10

such person shall provide such notice to the Com-11

mittee on Education and the Workforce and the12

Committee on Ways and Means of the House of13

Representatives and the Committee on Health, Edu-14

cation, Labor, and Pensions and the Committee on15

Finance of the Senate, which shall be treated as ma-16

terials provided in executive session.’’.17

(c) EFFECTIVE DATE.—The amendment made by18



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H.L.C.

TITLE VI—INVESTMENT ADVICE1

SEC. 601. AMENDMENTS TO EMPLOYEE RETIREMENT IN-2

COME SECURITY ACT OF 1974 PROVIDING3

PROHIBITED TRANSACTION EXEMPTION FOR4

PROVISION OF INVESTMENT ADVICE.5

(a) EXEMPTION FROM PROHIBITED TRANS-6

ACTIONS.—Section 408(b) of the Employee Retirement7

Income Security Act of 1974 (29 U.S.C. 1108(b)) is8

amended by adding at the end the following new para-9

graph:10

‘‘(14)(A) Any transaction described in subpara-11

graph (B) in connection with the provision of invest-12

ment advice described in section 3(21)(A)(ii), in any13

case in which—14

‘‘(i) the investment of assets of the plan is15

subject to the direction of plan participants or16

beneficiaries,17

‘‘(ii) the advice is provided to the plan or18

a participant or beneficiary of the plan by a fi-19

duciary adviser in connection with any sale, ac-20

quisition, or holding of a security or other prop-21

erty for purposes of investment of plan assets,22

and23

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H.L.C.

‘‘(iii) the requirements of subsection (g)1

are met in connection with the provision of the2

advice.3

‘‘(B) The transactions described in this sub-4

paragraph are the following:5

‘‘(i) the provision of the advice to the6

plan, participant, or beneficiary;7

‘‘(ii) the sale, acquisition, or holding8

of a security or other property (including9

any lending of money or other extension of10

credit associated with the sale, acquisition,11

or holding of a security or other property)12

pursuant to the advice; and13

‘‘(iii) the direct or indirect receipt of14

fees or other compensation by the fiduciary15

adviser or an affiliate thereof (or any em-16

ployee, agent, or registered representative17

of the fiduciary adviser or affiliate) in con-18

nection with the provision of the advice or19

in connection with a sale, acquisition, or20

holding of a security or other property pur-21

suant to the advice.’’.22

(b) REQUIREMENTS.—Section 408 of such Act is23

amended further by adding at the end the following new24

subsection:25

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H.L.C.

‘‘(g) REQUIREMENTS RELATING TO PROVISION OF1

INVESTMENT ADVICE BY FIDUCIARY ADVISERS.—2

‘‘(1) IN GENERAL.—The requirements of this3

subsection are met in connection with the provision4

of investment advice referred to in section5

3(21)(A)(ii), provided to an employee benefit plan or6

a participant or beneficiary of an employee benefit7

plan by a fiduciary adviser with respect to the plan8

in connection with any sale, acquisition, or holding9

of a security or other property for purposes of in-10

vestment of amounts held by the plan, if—11

‘‘(A) in the case of the initial provision of12

the advice with regard to the security or other13

property by the fiduciary adviser to the plan,14

participant, or beneficiary, the fiduciary adviser15

provides to the recipient of the advice, at a time16

reasonably contemporaneous with the initial17

provision of the advice, a written notification18

(which may consist of notification by means of19

electronic communication)—20

‘‘(i) of all fees or other compensation21

relating to the advice that the fiduciary ad-22

viser or any affiliate thereof is to receive23

(including compensation provided by any24

third party) in connection with the provi-25

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365

H.L.C.

sion of the advice or in connection with the1

sale, acquisition, or holding of the security2

or other property,3

‘‘(ii) of any material affiliation or con-4

tractual relationship of the fiduciary ad-5

viser or affiliates thereof in the security or6

other property,7

‘‘(iii) of any limitation placed on the8

scope of the investment advice to be pro-9

vided by the fiduciary adviser with respect10

to any such sale, acquisition, or holding of11

a security or other property,12

‘‘(iv) of the types of services provided13

by the fiduciary adviser in connection with14

the provision of investment advice by the15

fiduciary adviser,16

‘‘(v) that the adviser is acting as a fi-17

duciary of the plan in connection with the18

provision of the advice, and19

‘‘(vi) that a recipient of the advice20

may separately arrange for the provision of21

advice by another adviser, that could have22

no material affiliation with and receive no23

fees or other compensation in connection24

with the security or other property,25

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H.L.C.

‘‘(B) the fiduciary adviser provides appro-1

priate disclosure, in connection with the sale,2

acquisition, or holding of the security or other3

property, in accordance with all applicable secu-4

rities laws,5

‘‘(C) the sale, acquisition, or holding oc-6

curs solely at the direction of the recipient of7

the advice,8

‘‘(D) the compensation received by the fi-9

duciary adviser and affiliates thereof in connec-10

tion with the sale, acquisition, or holding of the11

security or other property is reasonable, and12

‘‘(E) the terms of the sale, acquisition, or13

holding of the security or other property are at14

least as favorable to the plan as an arm’s15

length transaction would be.16

‘‘(2) STANDARDS FOR PRESENTATION OF IN-17

FORMATION.—18

‘‘(A) IN GENERAL.—The notification re-19

quired to be provided to participants and bene-20

ficiaries under paragraph (1)(A) shall be writ-21

ten in a clear and conspicuous manner and in22

a manner calculated to be understood by the av-23

erage plan participant and shall be sufficiently24

accurate and comprehensive to reasonably ap-25

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367

H.L.C.

prise such participants and beneficiaries of the1

information required to be provided in the noti-2

fication.3

‘‘(B) MODEL FORM FOR DISCLOSURE OF4

FEES AND OTHER COMPENSATION.—The Sec-5

retary shall issue a model form for the disclo-6

sure of fees and other compensation required in7

paragraph (1)(A)(i) which meets the require-8

ments of subparagraph (A).9

‘‘(3) EXEMPTION CONDITIONED ON MAKING RE-10

QUIRED INFORMATION AVAILABLE ANNUALLY, ON11

REQUEST, AND IN THE EVENT OF MATERIAL12

CHANGE.—The requirements of paragraph (1)(A)13

shall be deemed not to have been met in connection14

with the initial or any subsequent provision of advice15

described in paragraph (1) to the plan, participant,16

or beneficiary if, at any time during the provision of17

advisory services to the plan, participant, or bene-18

ficiary, the fiduciary adviser fails to maintain the in-19

formation described in clauses (i) through (iv) of20

subparagraph (A) in currently accurate form and in21

the manner described in paragraph (2) or fails—22

‘‘(A) to provide, without charge, such cur-23

rently accurate information to the recipient of24

the advice no less than annually,25

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H.L.C.

‘‘(B) to make such currently accurate in-1

formation available, upon request and without2

charge, to the recipient of the advice, or3

‘‘(C) in the event of a material change to4

the information described in clauses (i) through5

(iv) of paragraph (1)(A), to provide, without6

charge, such currently accurate information to7

the recipient of the advice at a time reasonably8

contemporaneous to the material change in in-9

formation.10

‘‘(4) MAINTENANCE FOR 6 YEARS OF EVIDENCE11

OF COMPLIANCE.—A fiduciary adviser referred to in12

paragraph (1) who has provided advice referred to in13

such paragraph shall, for a period of not less than14

6 years after the provision of the advice, maintain15

any records necessary for determining whether the16

requirements of the preceding provisions of this sub-17

section and of subsection (b)(14) have been met. A18

transaction prohibited under section 406 shall not be19

considered to have occurred solely because the20

records are lost or destroyed prior to the end of the21

6-year period due to circumstances beyond the con-22

trol of the fiduciary adviser.23

‘‘(5) EXEMPTION FOR PLAN SPONSOR AND CER-24

TAIN OTHER FIDUCIARIES.—25

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H.L.C.

‘‘(A) IN GENERAL.—Subject to subpara-1

graph (B), a plan sponsor or other person who2

is a fiduciary (other than a fiduciary adviser)3

shall not be treated as failing to meet the re-4

quirements of this part solely by reason of the5

provision of investment advice referred to in6

section 3(21)(A)(ii) (or solely by reason of con-7

tracting for or otherwise arranging for the pro-8

vision of the advice), if—9

‘‘(i) the advice is provided by a fidu-10

ciary adviser pursuant to an arrangement11

between the plan sponsor or other fidu-12

ciary and the fiduciary adviser for the pro-13

vision by the fiduciary adviser of invest-14

ment advice referred to in such section,15

‘‘(ii) the terms of the arrangement re-16

quire compliance by the fiduciary adviser17

with the requirements of this subsection,18

and19

‘‘(iii) the terms of the arrangement20

include a written acknowledgment by the21

fiduciary adviser that the fiduciary adviser22

is a fiduciary of the plan with respect to23

the provision of the advice.24

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370

H.L.C.

‘‘(B) CONTINUED DUTY OF PRUDENT SE-1

LECTION OF ADVISER AND PERIODIC REVIEW.—2

Nothing in subparagraph (A) shall be construed3

to exempt a plan sponsor or other person who4

is a fiduciary from any requirement of this part5

for the prudent selection and periodic review of6

a fiduciary adviser with whom the plan sponsor7

or other person enters into an arrangement for8

the provision of advice referred to in section9

3(21)(A)(ii). The plan sponsor or other person10

who is a fiduciary has no duty under this part11

to monitor the specific investment advice given12

by the fiduciary adviser to any particular recipi-13

ent of the advice.14

‘‘(C) AVAILABILITY OF PLAN ASSETS FOR15

PAYMENT FOR ADVICE.—Nothing in this part16

shall be construed to preclude the use of plan17

assets to pay for reasonable expenses in pro-18

viding investment advice referred to in section19

3(21)(A)(ii).20

‘‘(6) DEFINITIONS.—For purposes of this sub-21

section and subsection (b)(14)—22

‘‘(A) FIDUCIARY ADVISER.—The term ‘fi-23

duciary adviser’ means, with respect to a plan,24

a person who is a fiduciary of the plan by rea-25

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371

H.L.C.

son of the provision of investment advice by the1

person to the plan or to a participant or bene-2

ficiary and who is—3

‘‘(i) registered as an investment ad-4

viser under the Investment Advisers Act of5

1940 (15 U.S.C. 80b–1 et seq.) or under6

the laws of the State in which the fiduciary7

maintains its principal office and place of8

business,9

‘‘(ii) a bank or similar financial insti-10

tution referred to in section 408(b)(4) or a11

savings association (as defined in section12

3(b)(1) of the Federal Deposit Insurance13

Act (12 U.S.C. 1813(b)(1))), but only if14

the advice is provided through a trust de-15

partment of the bank or similar financial16

institution or savings association which is17

subject to periodic examination and review18

by Federal or State banking authorities,19

‘‘(iii) an insurance company qualified20

to do business under the laws of a State,21

‘‘(iv) a person registered as a broker22

or dealer under the Securities Exchange23

Act of 1934 (15 U.S.C. 78a et seq.),24

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H.L.C.

‘‘(v) an affiliate of a person described1

in any of clauses (i) through (iv), or2

‘‘(vi) an employee, agent, or registered3

representative of a person described in any4

of clauses (i) through (v) who satisfies the5

requirements of applicable insurance,6

banking, and securities laws relating to the7

provision of the advice.8

‘‘(B) AFFILIATE.—The term ‘affiliate’ of9

another entity means an affiliated person of the10

entity (as defined in section 2(a)(3) of the In-11

vestment Company Act of 1940 (15 U.S.C.12

80a–2(a)(3))).13

‘‘(C) REGISTERED REPRESENTATIVE.—14

The term ‘registered representative’ of another15

entity means a person described in section16

3(a)(18) of the Securities Exchange Act of17

1934 (15 U.S.C. 78c(a)(18)) (substituting the18

entity for the broker or dealer referred to in19

such section) or a person described in section20

202(a)(17) of the Investment Advisers Act of21

1940 (15 U.S.C. 80b–2(a)(17)) (substituting22

the entity for the investment adviser referred to23

in such section).’’.24

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H.L.C.


this section shall apply with respect to advice referred to2

in section 3(21)(A)(ii) of the Employee Retirement In-3

come Security Act of 1974 provided on or after January4

1, 2006.5

SEC. 602. AMENDMENTS TO INTERNAL REVENUE CODE OF6

1986 PROVIDING PROHIBITED TRANSACTION7

EXEMPTION FOR PROVISION OF INVESTMENT8

ADVICE.9

(a) EXEMPTION FROM PROHIBITED TRANS-10

ACTIONS.—Subsection (d) of section 4975 of the Internal11

Revenue Code of 1986 (relating to exemptions from tax12

on prohibited transactions), as amended by this Act, is13

amended—14

(1) in paragraph (17), by striking ‘‘or’’ at the15

end;16

(2) in paragraph (18), by striking the period at17

the end and inserting ‘‘; or’’; and18

(3) by adding at the end the following new19

paragraph:20

‘‘(19) any transaction described in subsection21

(f)(10)(A) in connection with the provision of invest-22

ment advice described in subsection (e)(3)(B)(i), in23

any case in which—24

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H.L.C.

‘‘(A) the investment of assets of the plan1

is subject to the direction of plan participants2

or beneficiaries,3

‘‘(B) the advice is provided to the plan or4

a participant or beneficiary of the plan by a fi-5

duciary adviser in connection with any sale, ac-6

quisition, or holding of a security or other prop-7

erty for purposes of investment of plan assets,8

and9

‘‘(C) the requirements of subsection10

(f)(10)(B) are met in connection with the provi-11

sion of the advice.’’.12

(b) ALLOWED TRANSACTIONS AND REQUIRE-13

MENTS.—Subsection (f) of such section 4975 (relating to14

other definitions and special rules), as amended by this15

Act, is amended by adding at the end the following new16

paragraph:17

‘‘(10) PROVISIONS RELATING TO INVESTMENT18

ADVICE PROVIDED BY FIDUCIARY ADVISERS.—19

‘‘(A) TRANSACTIONS ALLOWABLE IN CON-20

NECTION WITH INVESTMENT ADVICE PROVIDED21

BY FIDUCIARY ADVISERS.—The transactions re-22

ferred to in subsection (d)(19), in connection23

with the provision of investment advice by a fi-24

duciary adviser, are the following:25

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H.L.C.

‘‘(i) the provision of the advice to the1

plan, participant, or beneficiary;2

‘‘(ii) the sale, acquisition, or holding3

of a security or other property (including4

any lending of money or other extension of5

credit associated with the sale, acquisition,6

or holding of a security or other property)7

pursuant to the advice; and8

‘‘(iii) the direct or indirect receipt of9

fees or other compensation by the fiduciary10

adviser or an affiliate thereof (or any em-11

ployee, agent, or registered representative12

of the fiduciary adviser or affiliate) in con-13

nection with the provision of the advice or14

in connection with a sale, acquisition, or15

holding of a security or other property pur-16

suant to the advice.17

‘‘(B) REQUIREMENTS RELATING TO PROVI-18

SION OF INVESTMENT ADVICE BY FIDUCIARY19

ADVISERS.—The requirements of this subpara-20

graph (referred to in subsection (d)(19)(C)) are21

met in connection with the provision of invest-22

ment advice referred to in subsection (e)(3)(B),23

provided to a plan or a participant or bene-24

ficiary of a plan by a fiduciary adviser with re-25

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376

H.L.C.

spect to the plan in connection with any sale,1

acquisition, or holding of a security or other2

property for purposes of investment of amounts3

held by the plan, if—4

‘‘(i) in the case of the initial provision5

of the advice with regard to the security or6

other property by the fiduciary adviser to7

the plan, participant, or beneficiary, the fi-8

duciary adviser provides to the recipient of9

the advice, at a time reasonably contem-10

poraneous with the initial provision of the11

advice, a written notification (which may12

consist of notification by means of elec-13

tronic communication)—14

‘‘(I) of all fees or other com-15

pensation relating to the advice that16

the fiduciary adviser or any affiliate17

thereof is to receive (including com-18

pensation provided by any third19

party) in connection with the provi-20

sion of the advice or in connection21

with the sale, acquisition, or holding22

of the security or other property,23

‘‘(II) of any material affiliation24

or contractual relationship of the fidu-25

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377

H.L.C.

ciary adviser or affiliates thereof in1

the security or other property,2

‘‘(III) of any limitation placed on3

the scope of the investment advice to4

be provided by the fiduciary adviser5

with respect to any such sale, acquisi-6

tion, or holding of a security or other7

property,8

‘‘(IV) of the types of services9

provided by the fiduciary adviser in10

connection with the provision of in-11

vestment advice by the fiduciary ad-12

viser,13

‘‘(V) that the adviser is acting as14

a fiduciary of the plan in connection15

with the provision of the advice, and16

‘‘(VI) that a recipient of the ad-17

vice may separately arrange for the18

provision of advice by another adviser,19

that could have no material affiliation20

with and receive no fees or other com-21

pensation in connection with the secu-22

rity or other property,23

‘‘(ii) the fiduciary adviser provides ap-24

propriate disclosure, in connection with the25

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378

H.L.C.

sale, acquisition, or holding of the security1

or other property, in accordance with all2

applicable securities laws,3

‘‘(iii) the sale, acquisition, or holding4

occurs solely at the direction of the recipi-5

ent of the advice,6

‘‘(iv) the compensation received by the7

fiduciary adviser and affiliates thereof in8

connection with the sale, acquisition, or9

holding of the security or other property is10

reasonable, and11

‘‘(v) the terms of the sale, acquisition,12

or holding of the security or other property13

are at least as favorable to the plan as an14

arm’s length transaction would be.15

‘‘(C) STANDARDS FOR PRESENTATION OF16

INFORMATION.—The notification required to be17

provided to participants and beneficiaries under18

subparagraph (B)(i) shall be written in a clear19

and conspicuous manner and in a manner cal-20

culated to be understood by the average plan21

participant and shall be sufficiently accurate22

and comprehensive to reasonably apprise such23

participants and beneficiaries of the information24

required to be provided in the notification.25

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H.L.C.

‘‘(D) EXEMPTION CONDITIONED ON MAK-1

ING REQUIRED INFORMATION AVAILABLE ANNU-2

ALLY, ON REQUEST, AND IN THE EVENT OF MA-3

TERIAL CHANGE.—The requirements of sub-4

paragraph (B)(i) shall be deemed not to have5

been met in connection with the initial or any6

subsequent provision of advice described in sub-7

paragraph (B) to the plan, participant, or bene-8

ficiary if, at any time during the provision of9

advisory services to the plan, participant, or10

beneficiary, the fiduciary adviser fails to main-11

tain the information described in subclauses (I)12

through (IV) of subparagraph (B)(i) in cur-13

rently accurate form and in the manner re-14

quired by subparagraph (C), or fails—15

‘‘(i) to provide, without charge, such16

currently accurate information to the re-17

cipient of the advice no less than annually,18

‘‘(ii) to make such currently accurate19

information available, upon request and20

without charge, to the recipient of the ad-21

vice, or22

‘‘(iii) in the event of a material23

change to the information described in24

subclauses (I) through (IV) of subpara-25

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380

H.L.C.

graph (B)(i), to provide, without charge,1

such currently accurate information to the2

recipient of the advice at a time reasonably3

contemporaneous to the material change in4

information.5

‘‘(E) MAINTENANCE FOR 6 YEARS OF EVI-6

DENCE OF COMPLIANCE.—A fiduciary adviser7

referred to in subparagraph (B) who has pro-8

vided advice referred to in such subparagraph9

shall, for a period of not less than 6 years after10

the provision of the advice, maintain any11

records necessary for determining whether the12

requirements of the preceding provisions of this13

paragraph and of subsection (d)(19) have been14

met. A transaction prohibited under subsection15

(c)(1) shall not be considered to have occurred16

solely because the records are lost or destroyed17

prior to the end of the 6-year period due to cir-18

cumstances beyond the control of the fiduciary19

adviser.20

‘‘(F) EXEMPTION FOR PLAN SPONSOR AND21

CERTAIN OTHER FIDUCIARIES.—A plan sponsor22

or other person who is a fiduciary (other than23

a fiduciary adviser) shall not be treated as fail-24

ing to meet the requirements of this section25

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381

H.L.C.

solely by reason of the provision of investment1

advice referred to in subsection (e)(3)(B) (or2

solely by reason of contracting for or otherwise3

arranging for the provision of the advice), if—4

‘‘(i) the advice is provided by a fidu-5

ciary adviser pursuant to an arrangement6

between the plan sponsor or other fidu-7

ciary and the fiduciary adviser for the pro-8

vision by the fiduciary adviser of invest-9

ment advice referred to in such section,10

‘‘(ii) the terms of the arrangement re-11

quire compliance by the fiduciary adviser12

with the requirements of this paragraph,13

‘‘(iii) the terms of the arrangement14

include a written acknowledgment by the15

fiduciary adviser that the fiduciary adviser16

is a fiduciary of the plan with respect to17

the provision of the advice, and18

‘‘(iv) the requirements of part 4 of19

subtitle B of title I of the Employee Re-20

tirement Income Security Act of 1974 are21

met in connection with the provision of22

such advice.23

‘‘(G) DEFINITIONS.—For purposes of this24

paragraph and subsection (d)(19)—25

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382

H.L.C.

‘‘(i) FIDUCIARY ADVISER.—The term1

‘fiduciary adviser’ means, with respect to a2

plan, a person who is a fiduciary of the3

plan by reason of the provision of invest-4

ment advice by the person to the plan or5

to a participant or beneficiary and who6

is—7

‘‘(I) registered as an investment8

adviser under the Investment Advisers9

Act of 1940 (15 U.S.C. 80b–1 et seq.)10

or under the laws of the State in11

which the fiduciary maintains its prin-12

cipal office and place of business,13

‘‘(II) a bank or similar financial14

institution referred to in subsection15

(d)(4) or a savings association (as de-16

fined in section 3(b)(1) of the Federal17

Deposit Insurance Act (12 U.S.C.18

1813(b)(1))), but only if the advice is19

provided through a trust department20

of the bank or similar financial insti-21

tution or savings association which is22

subject to periodic examination and23

review by Federal or State banking24

authorities,25

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383

H.L.C.

‘‘(III) an insurance company1

qualified to do business under the2

laws of a State,3

‘‘(IV) a person registered as a4

broker or dealer under the Securities5

Exchange Act of 1934 (15 U.S.C. 78a6

et seq.),7

‘‘(V) an affiliate of a person de-8

scribed in any of subclauses (I)9

through (IV), or10

‘‘(VI) an employee, agent, or reg-11

istered representative of a person de-12

scribed in any of subclauses (I)13

through (V) who satisfies the require-14

ments of applicable insurance, bank-15

ing, and securities laws relating to the16

provision of the advice.17

‘‘(ii) AFFILIATE.—The term ‘affiliate’18

of another entity means an affiliated per-19

son of the entity (as defined in section20

2(a)(3) of the Investment Company Act of21

1940 (15 U.S.C. 80a–2(a)(3))).22

‘‘(iii) REGISTERED REPRESENTA-23

TIVE.—The term ‘registered representa-24

tive’ of another entity means a person de-25

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384

H.L.C.

scribed in section 3(a)(18) of the Securi-1

ties Exchange Act of 1934 (15 U.S.C.2

78c(a)(18)) (substituting the entity for the3

broker or dealer referred to in such sec-4

tion) or a person described in section5

202(a)(17) of the Investment Advisers Act6

of 1940 (15 U.S.C. 80b–2(a)(17)) (sub-7

stituting the entity for the investment ad-8

viser referred to in such section).’’.9


this section shall apply with respect to advice referred to11

in section 4975(c)(3)(B) of the Internal Revenue Code of12

1986 provided on or after January 1, 2006.13

TITLE VII—BENEFIT ACCRUAL14

STANDARDS15

SEC. 701. BENEFIT ACCRUAL STANDARDS.16

(a) AMENDMENTS TO THE EMPLOYEE RETIREMENT17

INCOME SECURITY ACT OF 1974.—18

(1) RULES RELATING TO REDUCTION IN RATE19

OF BENEFIT ACCRUAL.—Section 204(b)(1)(H) of the20


(29 U.S.C. 1054(b)(1)(H)) is amended by adding at22

the end the following new clauses:23

‘‘(vii)(I) A plan shall not be treated as failing to meet24

the requirements of clause (i) if a participant’s entire ac-25

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385

H.L.C.

crued benefit, as determined as of any date under the for-1

mula for determining benefits as set forth in the text of2

the plan documents, would be equal to or greater than3

that of any similarly situated, younger individual.4

‘‘(II) For purposes of this clause, an individual is5

similarly situated to a participant if such individual is6

identical to such participant in every respect (including pe-7

riod of service, compensation, position, date of hire, work8

history, and any other respect) except for age.9

‘‘(III) In determining the entire accrued benefit for10

purposes of this clause, the subsidized portion of any early11

retirement benefit (including any early retirement subsidy12

that is fully or partially included or reflected in an employ-13

ee’s opening balance or other transition benefits) shall be14

disregarded.15

‘‘(IV) In determining the entire accrued benefit for16

purposes of this clause, such benefit may be calculated as17

the present value of accrued benefits projected to normal18

retirement age, as an account balance, or as the current19

value of the accumulated percentage of the employee’s20

final average compensation.21

‘‘(viii) A plan shall not be treated as failing to meet22

the requirements of this subparagraph solely because the23

plan provides allowable offsets against those benefits24

under the plan which are attributable to employer con-25

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386

H.L.C.

tributions, based on benefits which are provided under1

title II of the Social Security Act, under the Railroad Re-2

tirement Act of 1974, under another plan described in sec-3

tion 401(a) of the Internal Revenue Code of 1986 main-4

tained by the same employer, under any retirement pro-5

gram for officers or employees of the Federal Government6

or of the government of any State or political subdivision7

thereof, or under such other arrangements as the Sec-8

retary of the Treasury may provide. For purposes of this9

clause, allowable offsets based on such benefits consist of10

offsets equal to all or part of the actual benefit payment11

amounts, reasonable projections or estimations of such12

benefit payment amounts, or actuarial equivalents of such13

actual benefit payment amounts, projections, or esti-14

mations (determined on the basis of reasonable actuarial15

assumptions).16

‘‘(ix) A plan shall not be treated as failing to meet17


plan provides a disparity in contributions or benefits with19

respect to which the requirements of section 401(l) of the20

Internal Revenue Code of 1986 are met.21

‘‘(x)(I) A plan shall not be treated as failing to meet22


plan provides for indexing of accrued benefits under the24

plan.25

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387

H.L.C.

‘‘(II) Except in the case of any benefit provided in1

the form of a variable annuity, subclause (I) shall not2

apply with respect to any indexing which results in an ac-3

crued benefit less than the accrued benefit determined4

without regard to such indexing.5

‘‘(III) For purposes of this clause, the term ‘indexing’6

means, in connection with an accrued benefit, the periodic7

adjustment of the accrued benefit by means of the applica-8

tion of a recognized investment index or methodology.’’.9

(2) DETERMINATIONS OF ACCRUED BENEFIT AS10

BALANCE OF BENEFIT ACCOUNT.—Section 203 of11

such Act (29 U.S.C. 1053) is amended by adding at12

the end the following new subsection:13

‘‘(f)(1) A defined benefit plan under which the ac-14

crued benefit payable under the plan upon distribution (or15

any portion thereof) is expressed as the balance of a hypo-16

thetical account maintained for the participant shall not17

be treated as failing to meet the requirements of sub-18

section (a)(2), section 204(c) (but only in the case of a19

plan which does not provide for employee contributions),20

or section 205(g) solely because of the amount actually21

made available for such distribution under the terms of22

the plan, in any case in which the applicable interest rate23

that would be used under the terms of the plan to project24

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388

H.L.C.

the amount of the participant’s account balance to normal1

retirement age is not greater than a market rate of return.2

‘‘(2) The Secretary of the Treasury may provide by3

regulation for rules governing the calculation of a market4

rate of return for purposes of paragraph (1) and for per-5

missible methods of crediting interest to the account (in-6

cluding fixed or variable interest rates) resulting in effec-7

tive rates of return meeting the requirements of paragraph8

(1).’’.9

(b) AMENDMENTS TO THE INTERNAL REVENUE10

CODE OF 1986.—11

(1) RULES RELATING TO REDUCTION IN RATE12

OF BENEFIT ACCRUAL.—Subparagraph (H) of sec-13

tion 411(b)(1) of the Internal Revenue Code of 198614

is amended by adding at the end the following new15

clauses:16

‘‘(vi) COMPARISON TO SIMILARLY SIT-17

UATED YOUNGER INDIVIDUAL.—18

‘‘(I) IN GENERAL.—A plan shall19

not be treated as failing to meet the20

requirements of clause (i) if a partici-21

pant’s entire accrued benefit, as deter-22

mined as of any date under the for-23

mula for determining benefits as set24

forth in the text of the plan docu-25

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389

H.L.C.

ments, would be equal to or greater1

than that of any similarly situated,2

younger individual.3

‘‘(II) SIMILARLY SITUATED.—4

For purposes of this clause, an indi-5

vidual is similarly situated to a partic-6

ipant if such individual is identical to7

such participant in every respect (in-8

cluding period of service, compensa-9

tion, position, date of hire, work his-10

tory, and any other respect) except for11

age.12

‘‘(III) DISREGARD OF SUB-13

SIDIZED EARLY RETIREMENT BENE-14

FITS.—In determining the entire ac-15

crued benefit for purposes of this16

clause, the subsidized portion of any17

early retirement benefit (including any18

early retirement subsidy that is fully19

or partially included or reflected in an20

employee’s opening balance or other21

transition benefits) shall be dis-22

regarded.23

‘‘(IV) ENTIRE ACCRUED BEN-24

EFIT.—In determining the entire ac-25

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390

H.L.C.

crued benefit for purposes of this1

clause, such benefit may be calculated2

as the present value of accrued bene-3

fits projected to normal retirement4

age, as an account balance, or as the5

current value of the accumulated per-6

centage of the employee’s final aver-7

age compensation.8

‘‘(vii) CERTAIN OFFSETS PER-9

MITTED.—A plan shall not be treated as10

failing to meet the requirements of this11

subparagraph solely because the plan pro-12

vides allowable offsets against those bene-13

fits under the plan which are attributable14

to employer contributions, based on bene-15

fits which are provided under title II of the16

Social Security Act, under the Railroad17

Retirement Act of 1974, under another18

plan described in section 401(a) main-19

tained by the same employer, under any20

retirement program for officers or employ-21

ees of the Federal Government or of the22

government of any State or political sub-23

division thereof, or under such other ar-24

rangements as the Secretary may provide.25

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391

H.L.C.

For purposes of this clause, allowable off-1

sets based on such benefits consist of off-2

sets equal to all or part of the actual ben-3

efit payment amounts, reasonable projec-4

tions or estimations of such benefit pay-5

ment amounts, or actuarial equivalents of6

such actual benefit payment amounts, pro-7

jections, or estimations (determined on the8

basis of reasonable actuarial assumptions).9

‘‘(viii) PERMITTED DISPARITIES IN10

PLAN CONTRIBUTIONS OR BENEFITS.—A11

plan shall not be treated as failing to meet12

the requirements of this subparagraph13

solely because the plan provides a disparity14

in contributions or benefits with respect to15

which the requirements of section 401(l)16

are met.17

‘‘(ix) INDEXING PERMITTED.—18

‘‘(I) IN GENERAL.—A plan shall19

not be treated as failing to meet the20

requirements of this subparagraph21

solely because the plan provides for22

indexing of accrued benefits under the23

plan.24

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392

H.L.C.

‘‘(II) PROTECTION OF ECONOMIC1

VALUE.—Except in the case of any2

benefit provided in the form of a vari-3

able annuity, subclause (I) shall not4

apply with respect to any indexing5

which results in an accrued benefit6

less than the accrued benefit deter-7

mined without regard to such index-8

ing.9

‘‘(III) INDEXING.—For purposes10

of this clause, the term ‘indexing’11

means, in connection with an accrued12

benefit, the periodic adjustment of the13

accrued benefit by means of the appli-14

cation of a recognized investment15

index or methodology.’’.16

(2) DETERMINATIONS OF ACCRUED BENEFIT AS17

BALANCE OF BENEFIT ACCOUNT.—Subsection (a) of18

section 411 of such Code is amended by adding at19

the end the following new paragraph:20

‘‘(13) DETERMINATIONS OF ACCRUED BENEFIT21

AS BALANCE OF BENEFIT ACCOUNT.—22

‘‘(A) IN GENERAL.—A defined benefit plan23

under which the accrued benefit payable under24

the plan upon distribution (or any portion25

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393

H.L.C.

thereof) is expressed as the balance of a hypo-1

thetical account maintained for the participant2

shall not be treated as failing to meet the re-3

quirements of subsection (a)(2), subsection (c)4

(but only in the case of a plan which does not5

provide for employee contributions), or section6

417(e) solely because of the amount actually7

made available for such distribution under the8

terms of the plan, in any case in which the ap-9

plicable interest rate that would be used under10

the terms of the plan to project the amount of11

the participant’s account balance to normal re-12

tirement age is not greater than a market rate13

of return.14

‘‘(B) REGULATIONS.—The Secretary may15

provide by regulation for rules governing the16

calculation of a market rate of return for pur-17

poses of subparagraph (A) and for permissible18

methods of crediting interest to the account (in-19

cluding fixed or variable interest rates) result-20

ing in effective rates of return meeting the re-21

quirements of subparagraph (A).’’.22


this section shall apply to periods beginning on or after24

June 29, 2005.25

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394

H.L.C.

TITLE VIII—DEDUCTION1

LIMITATIONS2

SEC. 801. INCREASE IN DEDUCTION LIMITS.3

(a) INCREASE IN DEDUCTION LIMIT FOR SINGLE-4

EMPLOYER PLANS.—Section 404 of the Internal Revenue5

Code of 1986 (relating to deduction for contributions of6

an employer to an employees’ trust or annuity plan and7

compensation under a deferred payment plan) is8

amended—9

(1) in subsection (a)(1)(A), by inserting ‘‘in the10

case of a defined benefit plan other than a multiem-11

ployer plan, in an amount determined under sub-12

section (o), and in the case of any other plan’’ after13

‘‘section 501(a),’’, and14

(2) by inserting at the end the following new15

subsection:16

‘‘(o) DEDUCTION LIMIT FOR SINGLE-EMPLOYER17

PLANS.—For purposes of subsection (a)(1)(A)—18

‘‘(1) IN GENERAL.—In the case of a defined19

benefit plan to which subsection (a)(1)(A) applies20

(other than a multiemployer plan), the amount de-21

termined under this subsection for any taxable year22

shall be equal to the amount determined under para-23

graph (2) with respect to each plan year ending with24

or within the taxable year.25

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395

H.L.C.

‘‘(2) DETERMINATION OF AMOUNT.—The1

amount determined under this paragraph for any2

plan year shall be equal to the excess (if any) of—3

‘‘(A) the greater of—4

‘‘(i) the sum of—5

‘‘(I) 150 percent of the funding6

target applicable to the plan for such7

plan year, determined under section8

430, plus9

‘‘(II) the target normal cost ap-10

plicable to the plan for such plan11

year, determined under section12

430(b), or13

‘‘(ii) in the case of a plan that is not14

in an at-risk status (as determined under15

430(i)), the sum of—16

‘‘(I) the funding target which17

would be applicable to the plan for18

such plan year if such plan were in an19

at-risk status, determined under sec-20

tion 430(d) (with regard to section21

430(i)), plus22

‘‘(II) the target normal cost23

which would be applicable to the plan24

for such plan year if such plan were25

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396

H.L.C.

in an at-risk status, determined under1

section 430(d) (with regard to section2

430(i)), over3

‘‘(B) the value of the plan assets (deter-4

mined under section 430(g)).5

‘‘(3) SPECIAL RULE FOR TERMINATING6

PLANS.—In the case of a plan which, subject to sec-7

tion 4041 of the Employee Retirement Income Secu-8

rity Act of 1974, terminates during the plan year,9

the amount determined under paragraph (2) shall10

not be less than the amount required to make the11

plan sufficient for benefit liabilities (within the12

meaning of section 4041(d) of such Act).13

‘‘(4) DEFINITIONS.—Any term used in this sub-14

section which is also used in section 430 shall have15

the same meaning given such term by section 430.’’.16

(b) INCREASE IN DEDUCTION LIMIT FOR MULTIEM-17

PLOYER PLANS.—Section 404(a)(1)(D) of such Code is18


‘‘(D) MINIMUM DEDUCTION FOR MULTIEM-20

PLOYER PLANS.—In the case of a defined ben-21

efit plan which is a multiemployer plan, except22

as provided in regulations, the maximum23

amount deductible under the limitations of this24

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397

H.L.C.

paragraph shall not be less than the excess (if1

any) of—2

‘‘(i) 140 percent of the current liabil-3

ity of the plan determined under section4

431(c)(6)(D), over5

‘‘(ii) the value of the plan’s assets de-6

termined under section 431(c)(2).’’.7

(c) TECHNICAL AND CONFORMING AMENDMENTS.—8

(1) The last sentence of section 404(a)(1)(A) of9

such Code is amended by striking ‘‘section 412’’10

each place it appears and inserting ‘‘section 431’’.11

(2) Section 404(a)(1)(B) of such Code is12

amended—13

(A) by striking ‘‘In the case of a plan’’ and14

inserting ‘‘In the case of a multiemployer plan’’,15

(B) by striking ‘‘section 412(c)(7)’’ each16

place it appears and inserting ‘‘section17

431(c)(6)’’,18

(C) by striking ‘‘section 412(c)(7)(B)’’ and19

inserting ‘‘section 431(c)(6)(D)’’,20

(D) by striking ‘‘section 412(c)(7)(A)’’ and21

inserting ‘‘section 431(c)(6)(A)’’, and22

(E) by striking ‘‘section 412’’ and insert-23

ing ‘‘section 431’’.24

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398

H.L.C.

(3) Section 404(a)(1) of such Code is amended1

by striking subparagraph (F).2


amended—4

(A) in subparagraph (A)(ii), by striking5

‘‘for the plan year’’ and all that follows and in-6

serting ‘‘which are multiemployer plans for the7

plan year which ends with or within such tax-8

able year (or for any prior plan year) and the9

maximum amount of employer contributions al-10

lowable under subsection (o) with respect to any11

such defined benefit plans which are not multi-12

employer plans for the plan year.’’,13

(B) by striking ‘‘section 412(l)’’ in the last14

sentence of subparagraph (A) and inserting15

‘‘paragraph (1)(D)(ii)’’, and16

(C) by striking subparagraph (D) and in-17

serting:18

‘‘(D) INSURANCE CONTRACT PLANS.—For19

purposes of this paragraph, a plan described in20

section 412(e)(3) shall be treated as a defined21

benefit plan.’’.22

(5) Section 404A(g)(3)(A) of such Code is23

amended by striking ‘‘paragraphs (3) and (7) of sec-24

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399

H.L.C.

tion 412(c)’’ and inserting ‘‘sections 430(h)(1) and1

431(c)(3) and (6)’’.2


this section shall apply to contributions for taxable years4


SEC. 802. UPDATING DEDUCTION RULES FOR COMBINA-6

TION OF PLANS.7

(a) IN GENERAL.—Subparagraph (C) of section8

404(a)(7) of the Internal Revenue Code of 1986 (relating9

to limitation on deductions where combination of defined10

contribution plan and defined benefit plan) is amended by11

adding after clause (ii) the following new clause:12

‘‘(iii) LIMITATION.—In the case of13

employer contributions to 1 or more de-14

fined contribution plans, this paragraph15

shall only apply to the extent that such16

contributions exceed 6 percent of the com-17

pensation otherwise paid or accrued during18

the taxable year to the beneficiaries under19

such plans. For purposes of this clause,20

amounts carried over from preceding tax-21

able years under subparagraph (B) shall22

be treated as employer contributions to 123

or more defined contributions to the extent24

attributable to employer contributions to25

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400

H.L.C.

such plans in such preceding taxable1

years.’’.2

(b) CONFORMING AMENDMENTS.—Subparagraph (A)3

of section 4972(c)(6) of such Code (relating to nondeduct-4

ible contributions) is amended to read as follows:5

‘‘(A) so much of the contributions to 1 or6

more defined contribution plans which are not7

deductible when contributed solely because of8

section 404(a)(7) as does not exceed the9

amount of contributions described in section10

401(m)(4)(A), or’’.11


this section shall apply to contributions for taxable years13


TITLE IX—ENHANCED RETIRE-15

MENTS SAVINGS AND DE-16

FINED CONTRIBUTION PLANS17

SEC. 901. PENSIONS AND INDIVIDUAL RETIREMENT AR-18

RANGEMENT PROVISIONS OF ECONOMIC19

GROWTH AND TAX RELIEF RECONCILIATION20

ACT OF 2001 MADE PERMANENT.21

Title IX of the Economic Growth and Tax Relief Rec-22

onciliation Act of 2001 shall not apply to the provisions23

of, and amendments made by, subtitles (A) through (F)24

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401

H.L.C.

of title VI of such Act (relating to pension and individual1

retirement arrangement provisions).2

SEC. 902. SAVER’S CREDIT.3

(a) PERMANENCY.—Section 25B of the Internal Rev-4

enue Code of 1986 (relating to elective deferrals and IRA5

contributions by certain individuals) is amended by strik-6

ing subsection (h).7

(b) VOLUNTARY DEPOSIT INTO QUALIFIED AC-8

COUNT.—9

(1) Section 25B of such Code, as amended by10

subsection (a), is further amended by adding at the11

end the following new subsection:12

‘‘(h) VOLUNTARY DEPOSIT INTO QUALIFIED AC-13

COUNT.—14

‘‘(1) IN GENERAL.—So much of any overpay-15

ment under section 6401(b) as does not exceed the16

amount allowed as a tax credit under subsection (a)17

shall, at the election of the taxpayer, be paid on be-18

half of the individual taxpayer to an applicable re-19

tirement plan designated by the individual, except20

that in the case of a joint return, each spouse shall21

be entitled to designate an applicable retirement22

plan with respect to payments attributable to such23

spouse.24

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402

H.L.C.

‘‘(2) APPLICABLE RETIREMENT PLAN.—For1

purposes of this subsection, the term ‘applicable re-2

tirement plan’ means any eligible retirement plan3

(as defined in section 402(c)(8)(B)) that elects to4

accept deposits under this subsection.’’.5


by paragraph (1) shall apply to taxable years begin-7


SEC. 903. INCREASING PARTICIPATION THROUGH AUTO-9

MATIC CONTRIBUTION ARRANGEMENTS.10

(a) IN GENERAL.—Section 401(k) of the Internal11

Revenue Code of 1986 (relating to cash or deferred ar-12

rangement) is amended by adding at the end the following13

new paragraph:14

‘‘(13) ALTERNATIVE METHOD FOR AUTOMATIC15

CONTRIBUTION ARRANGEMENTS TO MEET NON-16

DISCRIMINATION REQUIREMENTS.—17

‘‘(A) IN GENERAL.—A qualified automatic18

contribution arrangement shall be treated as19

meeting the requirements of paragraph20

(3)(A)(ii).21

‘‘(B) QUALIFIED AUTOMATIC CONTRIBU-22

TION ARRANGEMENT.—For purposes of this23

paragraph, the term ‘qualified automatic con-24

tribution arrangement’ means any cash or de-25

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403

H.L.C.

ferred arrangement which meets the require-1

ments of subparagraphs (C) through (F).2

‘‘(C) AUTOMATIC DEFERRAL.—3

‘‘(i) IN GENERAL.—The requirements4

of this subparagraph are met if, under the5

arrangement, each employee eligible to6

participate in the arrangement is treated7

as having elected to have the employer8

make elective contributions in an amount9

equal to a qualified percentage of com-10

pensation.11

‘‘(ii) ELECTION OUT.—The election12

treated as having been made under clause13

(i) shall cease to apply with respect to any14

employee if such employee makes an af-15

firmative election—16

‘‘(I) to not have such contribu-17

tions made, or18

‘‘(II) to make elective contribu-19

tions at a level specified in such af-20

firmative election.21

‘‘(iii) QUALIFIED PERCENTAGE.—For22

purposes of this subparagraph, the term23

‘qualified percentage’ means, with respect24

to any employee, any percentage deter-25

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404

H.L.C.

mined under the arrangement if such per-1

centage is applied uniformly, does not ex-2

ceed 10 percent, and is at least—3

‘‘(I) 3 percent during the period4

ending on the last day of the first5

plan year which begins after the date6

on which the first elective contribution7

described in clause (i) is made with8

respect to such employee,9

‘‘(II) 4 percent during the first10

plan year following the plan year de-11

scribed in subclause (I),12

‘‘(III) 5 percent during the sec-13

ond plan year following the plan year14

described in subclause (I), and15

‘‘(IV) 6 percent during any sub-16

sequent plan year.17

‘‘(iv) AUTOMATIC DEFERRAL FOR18

CURRENT EMPLOYEES NOT REQUIRED.—19

Clause (i) shall be applied without taking20

into account any employee who was eligible21

to participate in the arrangement (or a22

predecessor arrangement) immediately be-23

fore the date on which such arrangement24

becomes a qualified automatic contribution25

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405

H.L.C.

arrangement (determined after application1

of this clause).2

‘‘(D) PARTICIPATION.—3

‘‘(i) IN GENERAL.—An arrangement4

meets the requirements of this subpara-5

graph for any year if, during the plan year6

or the preceding plan year, elective con-7

tributions are made on behalf of at least8

70 percent of the employees eligible to par-9

ticipate in the arrangement other than—10

‘‘(I) highly compensated employ-11

ees, and12

‘‘(II) at the election of the plan13

administrator, employees described in14

subparagraph (C)(iv).15

‘‘(ii) FIRST PLAN YEAR.—An arrange-16

ment (other than a successor arrangement)17

shall be treated as meeting the require-18

ments of this subparagraph with respect to19

the first plan year with respect to which20

such arrangement is a qualified automatic21

contribution arrangement (determined22

without regard to this subparagraph).23

‘‘(E) MATCHING OR NONELECTIVE CON-24

TRIBUTIONS.—25

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406

H.L.C.


of this subparagraph are met if, under the2

arrangement, the employer—3

‘‘(I) makes matching contribu-4

tions on behalf of each employee who5

is not a highly compensated employee6

in an amount equal to 50 percent of7

the elective contributions of the em-8

ployee to the extent such elective con-9

tributions do not exceed 6 percent of10

compensation, or11

‘‘(II) is required, without regard12

to whether the employee makes an13

elective contribution or employee con-14

tribution, to make a contribution to a15

defined contribution plan on behalf of16

each employee who is not a highly17

compensated employee and who is eli-18

gible to participate in the arrange-19

ment in an amount equal to at least20

2 percent of the employee’s compensa-21

tion.22

‘‘(ii) APPLICATION OF RULES FOR23

MATCHING CONTRIBUTIONS.—The rules of24

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407

H.L.C.

clauses (ii) and (iii) of paragraph (12)(B)1

shall apply for purposes of clause (i)(I).2

‘‘(iii) WITHDRAWAL AND VESTING RE-3

STRICTIONS.—An arrangement shall not be4

treated as meeting the requirements of5

clause (i) unless, with respect to employer6

contributions (including matching con-7

tributions) taken into account in deter-8

mining whether the requirements of clause9

(i) are met—10

‘‘(I) any employee who has com-11

pleted at least 2 years of service12

(within the meaning of section13

411(a)) has a nonforfeitable right to14

100 percent of the employee’s accrued15

benefit derived from such employer16

contributions, and17

‘‘(II) the requirements of sub-18

paragraph (B) of paragraph (2) are19

met with respect to all such employer20

contributions.21

‘‘(iv) APPLICATION OF CERTAIN22

OTHER RULES.—The rules of subpara-23

graphs (E)(ii) and (F) of paragraph (12)24

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408

H.L.C.

shall apply for purposes of subclauses (I)1

and (II) of clause (i).2

‘‘(F) NOTICE REQUIREMENTS.—3


of this subparagraph are met if, within a5

reasonable period before each plan year,6

each employee eligible to participate in the7

arrangement for such year receives written8

notice of the employee’s rights and obliga-9

tions under the arrangement which—10

‘‘(I) is sufficiently accurate and11

comprehensive to apprise the employee12

of such rights and obligations, and13

‘‘(II) is written in a manner cal-14

culated to be understood by the aver-15

age employee to whom the arrange-16

ment applies.17

‘‘(ii) TIMING AND CONTENT REQUIRE-18

MENTS.—A notice shall not be treated as19

meeting the requirements of clause (i) with20

respect to an employee unless—21

‘‘(I) the notice explains the em-22

ployee’s right under the arrangement23

to elect not to have elective contribu-24

tions made on the employee’s behalf25

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409

H.L.C.

(or to elect to have such contributions1

made at a different percentage),2

‘‘(II) in the case of an arrange-3

ment under which the employee may4

elect among 2 or more investment op-5

tions, the notice explains how con-6

tributions made under the arrange-7

ment will be invested in the absence of8

any investment election by the em-9

ployee, and10

‘‘(III) the employee has a reason-11

able period of time after receipt of the12

notice described in subclauses (I) and13

(II) and before the first elective con-14

tribution is made to make either such15

election.’’.16

(b) MATCHING CONTRIBUTIONS.—Section 401(m) of17

such Code (relating to nondiscrimination test for matching18

contributions and employee contributions) is amended by19

redesignating paragraph (12) as paragraph (13) and by20

inserting after paragraph (11) the following new para-21

graph:22

‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC23

CONTRIBUTION ARRANGEMENTS.—A defined con-24

tribution plan shall be treated as meeting the re-25

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410

H.L.C.

quirements of paragraph (2) with respect to match-1

ing contributions if the plan—2

‘‘(A) is a qualified automatic contribution3

arrangement (as defined in subsection (k)(13)),4

and5

‘‘(B) meets the requirements of paragraph6

(11)(B).’’.7

(c) EXCLUSION FROM DEFINITION OF TOP-HEAVY8

PLANS.—9

(1) ELECTIVE CONTRIBUTION RULE.—Clause10

(i) of section 416(g)(4)(H) of such Code is amended11

by inserting ‘‘or 401(k)(13)’’ after ‘‘section12

401(k)(12)’’.13

(2) MATCHING CONTRIBUTION RULE.—Clause14

(ii) of section 416(g)(4)(H) of such Code is amended15

by inserting ‘‘or 401(m)(12)’’ after ‘‘section16

401(m)(11)’’.17

(d) CORRECTIVE DISTRIBUTIONS.—18

(1) IN GENERAL.—Section 414 of the Internal19

Revenue Code of 1986 (relating to definitions and20

special rules) is amended by adding at the end the21


‘‘(w) AUTOMATIC CONTRIBUTION ARRANGEMENTS.—23

‘‘(1) IN GENERAL.—No tax shall be imposed24

under section 72(t) on a distribution from an appli-25

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411

H.L.C.

cable employer plan to the employee with respect to1

whom such contribution relates if such distribution2

does not exceed the erroneous automatic contribu-3

tion amount and is made not later than the 1st4

April 15 following the close of the taxable year in5

which such contribution was made.6

‘‘(2) ERRONEOUS AUTOMATIC CONTRIBUTION7

AMOUNT.—For purposes of this subsection—8

‘‘(A) IN GENERAL.—The term ‘erroneous9

automatic contribution amount’ means the less-10

er of—11

‘‘(i) the amount of automatic con-12

tributions made during the applicable pe-13

riod which the employee elects in a notice14

to the plan administrator to treat as an er-15

roneous automatic contribution amount for16

purposes of this subsection, or17

‘‘(ii) $500.18

‘‘(B) AUTOMATIC CONTRIBUTION.—The19

term ‘automatic contribution’ means contribu-20

tions which, under the terms of the plan—21

‘‘(i) the employee can elect to be made22

as contributions under the plan on behalf23

of the employee, or to the employee di-24

rectly in cash, and25

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412

H.L.C.

‘‘(ii) which are made on behalf of the1

employee under the plan pursuant to a2

plan provision treating the employee as3

having elected to have the employer make4

such contributions on behalf of the em-5

ployee until the employee affirmatively6

elects not to have such contribution made7

or affirmatively elects to make contribu-8

tions as a specified level.9

‘‘(3) APPLICABLE EMPLOYER PLAN.—For pur-10

poses of this subsection, the term ‘applicable em-11

ployer plan’means—12

‘‘(A) an employees’ trust described in sec-13

tion 401(a) which is exempt from tax under14

section 501(a),15

‘‘(B) a plan under which amounts are con-16

tributed by an individual’s employer for an an-17

nuity contract described in section 403(b), and18

‘‘(C) an eligible deferred compensation19

plan described in section 457(b) which is main-20

tained by an eligible employer described in sec-21

tion 457(e)(1)(A).22

‘‘(4) APPLICABLE PERIOD.—For purposes of23

this subsection, the term ‘applicable period’ means,24

with respect to any employee, the three month pe-25

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413

H.L.C.

riod that begins on the first date that an automatic1

contribution described in paragraph (2)(B) is made2

with respect to such employee.3

‘‘(5) SPECIAL RULES.—A distribution described4

in paragraph (1) (subject to the limitation of para-5

graph (2))—6

‘‘(A) shall not be treated as a distribution7

for purposes of sections 401(k)(2)(B)(i),8

403(b)(7), 403(b)(11), and 457(d)(1)(A), and9

‘‘(B) shall not be taken into account for10

purposes of section 401(k)(3).’’.11

(2) VESTING CONFORMING AMENDMENTS.—12

(A) Section 411(a)(3)(G) of such Code is13

amended by inserting ‘‘an erroneous automatic14

contribution under section 414(w),’’ after15

‘‘402(g)(2)(A),’’.16

(B) The heading of section 411(a)(3)(G) of17

such Code is amended by inserting ‘‘OR ERRO-18

NEOUS AUTOMATIC CONTRIBUTION’’ before the19

period.20

(C) Section 401(k)(8)(E) of such Code is21

amended by inserting ‘‘an erroneous automatic22

contribution under section 414(w),’’ after23

‘‘402(g)(2)(A),’’.24

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414

H.L.C.

(D) The heading of section 401(k)(8)(E)1

of such Code is amended by inserting ‘‘OR ER-2

RONEOUS AUTOMATIC CONTRIBUTION’’ before3

the period.4

(E) Section 203(a)(3)(F) of the Employee5

Retirement Income Security Act of 1974 (296

U.S.C. 1053(a)(3)(F)) is amended by inserting7

‘‘an erroneous automatic contribution under8

section 414(w) of such Code,’’ after9

‘‘402(g)(2)(A) of such Code,’’.10

(e) CONTROL OVER PLAN ASSETS DEEMED TO HAVE11

BEEN EXERCISED WITH RESPECT TO DEFAULT INVEST-12

MENT ARRANGEMENTS.—Section 404(c) of the Employee13

Retirement Income Security Act of 1974, as amended by14

section 308, is further amended by adding at the end the15

following new paragraph:16

‘‘(5)(A) For purposes of paragraph (1), a participant17

in an individual account plan shall be treated as exercising18

control over the assets in the account with respect to the19

amount of contributions made under a default investment20

arrangement.21

‘‘(B)(i) For purposes of this paragraph, the term ‘de-22

fault investment arrangement’ means an arrangement—23

‘‘(I) which meets the requirements of subpara-24

graph (C),25

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415

H.L.C.

‘‘(II) under which the participant is treated as1

having elected to have the plan sponsor exercise con-2

trol over the assets in the participant’s account until3

the participant specifically elects to exercise such4

control, and5

‘‘(III) under which assets described in sub-6

clause (II) are invested in accordance with regula-7

tions prescribed by the Secretary.8

‘‘(ii) The regulations prescribed pursuant to clause9

(i)(III) shall provide guidance on the appropriateness of10

certain investments for designation as default investments11

under the arrangement, which shall include guidance12

regarding—13

‘‘(I) appropriate mixes of default investments14

and asset classes which the Secretary considers con-15

sistent with long-term capital appreciation, and16

‘‘(II) the designation of other default invest-17

ments.18

‘‘(C)(i) For purposes of subparagraph (B)(i)(I), an19

arrangement meets the requirements of this subparagraph20

for any plan year if, within a reasonable period before such21

plan year, the plan administrator gives to each participant22

to whom the arrangement applies for such plan year notice23

of the participant’s rights and obligations under the ar-24

rangement which—25

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416

H.L.C.

‘‘(I) is sufficiently accurate and comprehensive1

to apprise the participant of such rights and obliga-2

tions, and3

‘‘(II) is written in a manner calculated to be4

understood by the average participant to whom the5

arrangement applies.6

‘‘(ii) A notice shall not be treated as meeting the re-7

quirements of clause (i) with respect to a participant8

unless—9

‘‘(I) the notice includes an explanation of the10

participant’s right under the arrangement to specifi-11

cally elect to exercise control over the assets in the12

participant’s account,13

‘‘(II) the employee has a reasonable period of14

time, after receipt of the notice described in sub-15

clause (I) and before the assets are first invested, to16

specifically make such an election, and17

‘‘(III) the notice explains how contributions18

made under the arrangement will be invested in the19

absence of any investment election specifically made20

by the employee.’’.21

(f) PREEMPTION OF CONFLICTING STATE REGULA-22

TION.—Section 514 of the Employee Retirement Income23

Security Act of 1974 (29 U.S.C. 1144) is amended by24

adding at the end the following new subsection:25

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H.L.C.

‘‘(e)(1) Notwithstanding any other provision of this1

section, this title shall supersede any law of a State which2

would directly or indirectly prohibit or restrict the inclu-3

sion in any plan of an automatic contribution arrange-4

ment. The Secretary may prescribe regulations which5

would establish minimum standards that such an arrange-6

ment would be required to satisfy in order for this sub-7

section to apply in the case of such arrangement.8

‘‘(2)(A) For purposes of this subsection, the term9

‘automatic contribution arrangement’ means an10

arrangement—11

‘‘(i) which meets the requirements of paragraph12

(3),13

‘‘(ii) under which a participant may elect to14

have the plan sponsor make payments as contribu-15

tions under the plan on behalf of the participant, or16

to the participant directly in cash,17

‘‘(iii) under which a participant is treated as18

having elected to have the plan sponsor make such19

contributions in an amount equal to a uniform per-20

centage of compensation provided under the plan21

until the participant specifically elects not to have22

such contributions made (or specifically elects to23

have such contributions made at a different percent-24

age), and25

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H.L.C.

‘‘(iv) under which such contributions are in-1

vested in accordance with regulations prescribed by2

the Secretary.3

‘‘(B) The regulations prescribed pursuant to subpara-4

graph (A)(iv) shall provide guidance on the appropriate-5

ness of certain investments for designation as default in-6

vestments under the arrangement, which shall include7

guidance regarding appropriate mixes of default invest-8

ments and asset classes which the Secretary considers con-9

sistent with long-term capital appreciation10

‘‘(3)(A) For purposes of paragraph (2)(A)(i), an ar-11

rangement meets the requirements of this paragraph for12

any plan year if, within a reasonable period before such13

plan year, the plan administrator gives to each participant14

to whom the arrangement applies for such plan year notice15

of the participant’s rights and obligations under the ar-16

rangement which—17

‘‘(i) is sufficiently accurate and comprehensive18

to apprise the participant of such rights and obliga-19

tions, and20

‘‘(ii) is written in a manner calculated to be un-21

derstood by the average participant to whom the ar-22

rangement applies.23

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H.L.C.

‘‘(B) A notice shall not be treated as meeting the re-1

quirements of subparagraph (A) with respect to a partici-2

pant unless—3

‘‘(i) the notice includes an explanation of the4

participant’s right under the arrangement not to5

have elective contributions made on the participant’s6

behalf (or to elect to have such contributions made7

at a different percentage),8

‘‘(ii) the participant has a reasonable period of9

time, after receipt of the notice described in clause10

(i) and before the first elective contribution is made,11

to make such election, and12

‘‘(iii) the notice explains how contributions13

made under the arrangement will be invested in the14

absence of any investment election by the partici-15

pant.’’.16



cember 31, 2005.19

SEC. 904. PENALTY-FREE WITHDRAWALS FROM RETIRE-20

MENT PLANS FOR INDIVIDUALS CALLED TO21

ACTIVE DUTY FOR AT LEAST 179 DAYS.22

(a) IN GENERAL.—Paragraph (2) of section 72(t) of23

the Internal Revenue Code of 1986 (relating to 10-percent24

additional tax on early distributions from qualified retire-25

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H.L.C.

ment plans) is amended by adding at the end the following1

new subparagraph:2

‘‘(G) DISTRIBUTIONS FROM RETIREMENT3

PLANS TO INDIVIDUALS CALLED TO ACTIVE4

DUTY.—5

‘‘(i) IN GENERAL.—Any qualified re-6

servist distribution.7

‘‘(ii) AMOUNT DISTRIBUTED MAY BE8

REPAID.—Any individual who receives a9

qualified reservist distribution may, at any10

time during the 2-year period beginning on11

the day after the end of the active duty pe-12

riod, make one or more contributions to an13

individual retirement plan of such indi-14

vidual in an aggregate amount not to ex-15

ceed the amount of such distribution. The16

dollar limitations otherwise applicable to17

contributions to individual retirement plans18

shall not apply to any contribution made19

pursuant to the preceding sentence. No de-20

duction shall be allowed for any contribu-21

tion pursuant to this clause.22

‘‘(iii) QUALIFIED RESERVIST DIS-23

TRIBUTION.—For purposes of this sub-24

paragraph, the term ‘qualified reservist25

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421

H.L.C.

distribution’ means any distribution to an1

individual if—2

‘‘(I) such distribution is from an3

individual retirement plan, or from4

amounts attributable to employer con-5

tributions made pursuant to elective6

deferrals described in subparagraph7

(A) or (C) of section 402(g)(3) or sec-8

tion 501(c)(18)(D)(iii),9

‘‘(II) such individual was (by rea-10

son of being a member of a reserve11

component (as defined in section 10112

of title 37, United States Code)), or-13

dered or called to active duty for a pe-14

riod in excess of 179 days or for an15

indefinite period, and16

‘‘(III) such distribution is made17

during the period beginning on the18

date of such order or call and ending19

at the close of the active duty period.20

‘‘(iv) APPLICATION OF SUBPARA-21

GRAPH.—This subparagraph applies to in-22

dividuals ordered or called to active duty23

after September 11, 2001, and before Sep-24

tember 12, 2007. In no event shall the 2-25

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H.L.C.

year period referred to in clause (ii) end1

before the date which is 2-years after the2

date of the enactment of this subpara-3

graph.’’.4


(1) Section 401(k)(2)(B)(i) of such Code is6

amended by striking ‘‘or’’ at the end of subclause7

(III), by striking ‘‘and’’ at the end of subclause (IV)8

and inserting ‘‘or’’, and by inserting after subclause9

(IV) the following new subclause:10

‘‘(V) in the case of a qualified re-11

servist distribution (as defined in sec-12

tion 72(t)(2)(G)(iii)), the date on13

which a period referred to in sub-14

clause (III) of such section begins,15

and’’.16

(2) Section 403(b)(7)(A)(ii) of such Code is17

amended by inserting ‘‘(unless such amount is a dis-18

tribution to which section 72(t)(2)(G) applies)’’ after19

‘‘distributee’’.20

(3) Section 403(b)(11) of such Code is amend-21

ed by striking ‘‘or’’ at the end of subparagraph (A),22

by striking the period at the end of subparagraph23

(B) and inserting ‘‘, or’’, and by inserting after sub-24

paragraph (B) the following new subparagraph:25

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H.L.C.

‘‘(C) for distributions to which section1

72(t)(2)(G) applies.’’.2

(c) EFFECTIVE DATE; WAIVER OF LIMITATIONS.—3


by this section shall apply to distributions after Sep-5

tember 11, 2001.6

(2) WAIVER OF LIMITATIONS.—If refund or7

credit of any overpayment of tax resulting from the8

amendments made by this section is prevented at9

any time before the close of the 1-year period begin-10

ning on the date of the enactment of this Act by the11

operation of any law or rule of law (including res ju-12

dicata), such refund or credit may nevertheless be13

made or allowed if claim therefor is filed before the14

close of such period.15

SEC. 905. WAIVER OF 10 PERCENT EARLY WITHDRAWAL16

PENALTY TAX ON CERTAIN DISTRIBUTIONS17

OF PENSION PLANS FOR PUBLIC SAFETY EM-18

PLOYEES.19

(a) IN GENERAL.—Section 72(t)(2) of the Internal20

Revenue Code of 1986 (relating to subsection not to apply21

to certain distributions), as amended by section 904, is22

amended by adding at the end the following new sub-23

section:24

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H.L.C.

‘‘(H) DROP DISTRIBUTIONS TO QUALI-1

FIED PUBLIC SAFETY EMPLOYEES IN GOVERN-2

MENTAL PLANS.—3

‘‘(i) IN GENERAL.—Distributions to4

an individual who is a qualified public safe-5

ty employee from a governmental plan6

within the meaning of section 414(d) to7

the extent such distributions are attrib-8

utable to a DROP benefit.9

‘‘(ii) DEFINITIONS.—For purposes of10

this subparagraph—11

‘‘(I) DROP BENEFIT.—The term12

‘DROP benefit’ means a feature of a13

governmental plan which is a defined14

benefit plan and under which an em-15

ployee elects to receive credits to an16

account (including a notional account)17

in the plan which are not in excess of18

the plan benefits (payable in the form19

of an annuity) that would have been20

provided if the employee had retired21

under the plan at a specified earlier22

retirement date and which are in lieu23

of increases in the employee’s accrued24

pension benefit based on years of25

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425

H.L.C.

service after the effective date of the1

DROP election.2

‘‘(II) QUALIFIED PUBLIC SAFETY3

EMPLOYEE.—The term ‘qualified pub-4

lic safety employee’ means any em-5

ployee of any police department or fire6

department organized and operated by7

a State or political subdivision of a8

State if the employee provides police9

protection, firefighting services, or10

emergency medical services for any11

area within the jurisdiction of such12

State or political subdivision and if13

the employee was eligible to retire on14

or before the date of such election and15

receive immediate retirement bene-16

fits.’’.17


this section shall apply to distributions after the date of19

the enactment of this Act.20

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H.L.C.

SEC. 906. COMBAT ZONE COMPENSATION TAKEN INTO AC-1

COUNT FOR PURPOSES OF DETERMINING2

LIMITATION AND DEDUCTIBILITY OF CON-3

TRIBUTIONS TO INDIVIDUAL RETIREMENT4

PLANS.5

(a) IN GENERAL.—Subsection (f) of section 219 of6

the Internal Revenue Code of 1986 is amended by redesig-7

nating paragraph (7) as paragraph (8) and by inserting8

after paragraph (6) the following new paragraph:9

‘‘(7) SPECIAL RULE FOR COMPENSATION10

EARNED BY MEMBERS OF THE ARMED FORCES FOR11

SERVICE IN A COMBAT ZONE.—For purposes of sub-12

sections (b)(1)(B) and (c), the amount of compensa-13

tion includible in an individual’s gross income shall14

be determined without regard to section 112.’’.15


this section shall apply to taxable years beginning after17

December 31, 2005.18

SEC. 907. DIRECT PAYMENT OF TAX REFUNDS TO INDI-19

VIDUAL RETIREMENT PLANS.20

(a) IN GENERAL.—The Secretary of the Treasury (or21

the Secretary’s delegate) shall make available a form (or22

modify existing forms) for use by individuals to direct that23

a portion of any refund of overpayment of tax imposed24

by chapter 1 of the Internal Revenue Code of 1986 be25

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427

H.L.C.

paid directly to an individual retirement plan (as defined1

in section 7701(a)(37) of such Code) of such individual.2

(b) EFFECTIVE DATE.—The form required by sub-3

section (a) shall be made available for taxable years begin-4


SEC. 908. IRA ELIGIBILITY FOR THE DISABLED.6

(a) IN GENERAL.—Subsection (f) of section 219 of7

the Internal Revenue Code of 1986 (relating to other defi-8

nitions and special rules), as amended by this Act, is fur-9

ther amended by redesignating paragraph (8) as para-10

graph (9) and by inserting after paragraph (7) the fol-11


‘‘(8) SPECIAL RULE FOR CERTAIN DISABLED13

INDIVIDUALS.—In the case of an individual—14

‘‘(A) who is disabled (within the meaning15

of section 72(m)(7)), and16

‘‘(B) who has not attained the applicable17

age (as defined in section 401(a)(9)(H)) before18

the close of the taxable year,19

subparagraph (B) of subsection (b)(1) shall not20

apply.’’.21


this section shall apply to taxable years beginning after23


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H.L.C.

SEC. 909. ALLOW ROLLOVERS BY NONSPOUSE BENE-1

FICIARIES OF CERTAIN RETIREMENT PLAN2

DISTRIBUTIONS.3

(a) IN GENERAL.—4

(1) QUALIFIED PLANS.—Section 402(c) of the5

Internal Revenue Code of 1986 (relating to rollovers6

from exempt trusts) is amended by adding at the7

end the following new paragraph:8

‘‘(11) DISTRIBUTIONS TO INHERITED INDI-9

VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE-10

FICIARY.—11

‘‘(A) IN GENERAL.—If, with respect to any12

portion of a distribution from an eligible retire-13

ment plan of a deceased employee, a direct14

trustee-to-trustee transfer is made to an indi-15

vidual retirement plan described in clause (i) or16

(ii) of paragraph (8)(B) established for the pur-17

poses of receiving the distribution on behalf of18

an individual who is a designated beneficiary19

(as defined by section 401(a)(9)(E)) of the em-20

ployee and who is not the surviving spouse of21

the employee—22

‘‘(i) the transfer shall be treated as an23

eligible rollover distribution for purposes of24

this subsection,25

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H.L.C.

‘‘(ii) the individual retirement plan1

shall be treated as an inherited individual2

retirement account or individual retirement3

annuity (within the meaning of section4

408(d)(3)(C)) for purposes of this title,5

and6

‘‘(iii) section 401(a)(9)(B) (other than7

clause (iv) thereof) shall apply to such8

plan.9

‘‘(B) CERTAIN TRUSTS TREATED AS BENE-10

FICIARIES.—For purposes of this paragraph, to11

the extent provided in rules prescribed by the12

Secretary, a trust maintained for the benefit of13

one or more designated beneficiaries shall be14

treated in the same manner as a trust des-15

ignated beneficiary.’’.16

(2) SECTION 403(a) PLANS.—Subparagraph17

(B) of section 403(a)(4) of such Code (relating to18

rollover amounts) is amended by inserting ‘‘and19

(11)’’ after ‘‘(7)’’.20

(3) SECTION 403(b) PLANS.—Subparagraph21

(B) of section 403(b)(8) of such Code (relating to22

rollover amounts) is amended by striking ‘‘and (9)’’23

and inserting ‘‘, (9), and (11)’’.24

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H.L.C.

(4) SECTION 457 PLANS.—Subparagraph (B) of1

section 457(e)(16) of such Code (relating to rollover2

amounts) is amended by striking ‘‘and (9)’’ and in-3

serting ‘‘, (9), and (11)’’.4


this section shall apply to distributions after December 31,6

2005.7

TITLE X—PROVISIONS TO EN-8

HANCE HEALTH CARE AF-9

FORDABILITY10

SEC. 1001. TREATMENT OF ANNUITY AND LIFE INSURANCE11

CONTRACTS WITH A LONG-TERM CARE IN-12

SURANCE FEATURE.13

(a) EXCLUSION FROM GROSS INCOME.—Subsection14

(e) of section 72 of the Internal Revenue Code of 198615

(relating to amounts not received as annuities) is amended16

by redesignating paragraph (11) as paragraph (12) and17

by inserting after paragraph (10) the following new para-18

graph:19

‘‘(11) SPECIAL RULES FOR CERTAIN COMBINA-20

TION CONTRACTS PROVIDING LONG-TERM CARE IN-21

SURANCE.—Notwithstanding paragraphs (2), (5)(C),22

and (10), in the case of any charge against the cash23

value of an annuity contract or the cash surrender24

value of a life insurance contract made as payment25

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431

H.L.C.

for coverage under a qualified long-term care insur-1

ance contract which is part of or a rider on such an-2

nuity or life insurance contract—3

‘‘(A) the investment in the contract shall4

be reduced (but not below zero) by such charge,5

and6

‘‘(B) such charge shall not be includible in7

gross income.’’.8

(b) TAX-FREE EXCHANGES AMONG CERTAIN INSUR-9

ANCE POLICIES.—10

(1) ANNUITY CONTRACTS CAN INCLUDE QUALI-11

FIED LONG-TERM CARE INSURANCE RIDERS.—Para-12

graph (2) of section 1035(b) of such Code is amend-13

ed by adding at the end the following new sentence:14

‘‘For purposes of the preceding sentence, a contract15

shall not fail to be treated as an annuity contract16

solely because a qualified long-term care insurance17

contract is a part of or a rider on such contract.’’.18

(2) LIFE INSURANCE CONTRACTS CAN INCLUDE19

QUALIFIED LONG-TERM CARE INSURANCE RIDERS.—20

Paragraph (3) of section 1035(b) of such Code is21

amended by adding at the end the following new22

sentence: ‘‘For purposes of the preceding sentence,23

a contract shall not fail to be treated as a life insur-24

ance contract solely because a qualified long-term25

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432

H.L.C.

care insurance contract is a part of or a rider on1

such contract.’’.2

(3) EXPANSION OF TAX-FREE EXCHANGES OF3

LIFE INSURANCE, ENDOWMENT, AND ANNUITY CON-4

TRACTS FOR LONG-TERM CARE CONTRACTS.—Sub-5

section (a) of section 1035 of such Code (relating to6

certain exchanges of insurance policies) is7

amended—8

(A) in paragraph (1) by striking ‘‘con-9

tract;’’ and inserting ‘‘contract or for a quali-10

fied long-term care insurance contract;’’,11

(B) in paragraph (2) by striking ‘‘con-12

tract;’’ and inserting ‘‘contract, or (C) for a13

qualified long-term care insurance contract;’’,14

and15

(C) in paragraph (3) by striking ‘‘con-16

tract.’’ and inserting ‘‘contract or for a quali-17

fied long-term care insurance contract.’’.18

(4) TAX-FREE EXCHANGES OF QUALIFIED19

LONG-TERM CARE INSURANCE CONTRACT.—Sub-20

section (a) of section 1035 of such Code (relating to21

certain exchanges of insurance policies) is amended22

by striking ‘‘or’’ at the end of paragraph (2), by23

striking the period at the end of paragraph (3) and24

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433

H.L.C.

inserting ‘‘; or’’, and by inserting after paragraph1

(3) the following new paragraph:2

‘‘(4) a qualified long-term care insurance con-3

tract for a qualified long-term care insurance con-4

tract.’’.5

(c) TREATMENT OF COVERAGE PROVIDED AS PART6

OF A LIFE INSURANCE OR ANNUITY CONTRACT.—Sub-7

section (e) of section 7702B of such Code (relating to8

treatment of qualified long-term care insurance) is amend-9

ed to read as follows:10

‘‘(e) TREATMENT OF COVERAGE PROVIDED AS PART11

OF A LIFE INSURANCE OR ANNUITY CONTRACT.—12

‘‘(1) COVERAGE TREATED AS CONTRACT.—Ex-13

cept as otherwise provided in regulations prescribed14

by the Secretary, in the case of any long-term care15

insurance coverage (whether or not qualified) pro-16

vided by a rider on or as part of a life insurance17

contract or an annuity contract, this title shall apply18

as if the portion of the contract providing such cov-19

erage is a separate contract.20

‘‘(2) DENIAL OF DEDUCTION UNDER SECTION21

213.—No deduction shall be allowed under section22

213(a) for any payment made for coverage under a23

qualified long-term care insurance contract if such24

payment is made as a charge against the cash value25

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434

H.L.C.

of an annuity contract or the cash surrender value1

of a life insurance contract.2

‘‘(3) APPLICATION OF SECTION 7702.—Section3

7702(c)(2) (relating to the guideline premium limi-4

tation) shall be applied by increasing the guideline5

premium limitation with respect to the life insurance6

contract, as of any date—7

‘‘(A) by the sum of any charges (but not8

premium payments) against the life insurance9

contract’s cash surrender value (within the10

meaning of section 7702(f)(2)(A)) for coverage11

under the qualified long-term care insurance12

contract made to that date under the life insur-13

ance contract, less14

‘‘(B) any such charges the imposition of15

which reduces the premiums paid for the life in-16

surance contract (within the meaning of section17

7702(f)(1)).18

‘‘(4) PORTION DEFINED.—For purposes of this19

subsection, the term ‘portion’ means only the terms20

and benefits under a life insurance contract or annu-21

ity contract that are in addition to the terms and22

benefits under the contract without regard to long-23

term care insurance coverage.24

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H.L.C.

‘‘(5) ANNUITY CONTRACTS TO WHICH PARA-1

GRAPH (1) DOES NOT APPLY.—For purposes of this2

subsection, none of the following shall be treated as3

an annuity contract:4

‘‘(A) A trust described in section 401(a)5

which is exempt from tax under section 501(a).6

‘‘(B) A contract—7

‘‘(i) purchased by a trust described in8

subparagraph (A),9

‘‘(ii) purchased as part of a plan de-10

scribed in section 403(a),11

‘‘(iii) described in section 403(b),12

‘‘(iv) provided for employees of a life13

insurance company under a plan described14

in section 818(a)(3), or15

‘‘(v) from an individual retirement ac-16

count or an individual retirement annuity.17

‘‘(C) A contract purchased by an employer18

for the benefit of the employee (or the employ-19

ee’s spouse).20

Any dividend described in section 404(k) which is21

received by a participant or beneficiary shall, for22

purposes of this paragraph, be treated as paid under23

a separate contract to which subparagraph (B)(i)24

applies.’’.25

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H.L.C.

(d) INFORMATION REPORTING.—1

(1) Subpart B of part III of subchapter A of2

chapter 61 of such Code (relating to information3

concerning transactions with other persons) is4

amended by adding at the end the following new sec-5

tion:6

‘‘SEC. 6050U. CHARGES OR PAYMENTS FOR QUALIFIED7

LONG-TERM CARE INSURANCE CONTRACTS8

UNDER COMBINED ARRANGEMENTS.9

‘‘(a) REQUIREMENT OF REPORTING.—Any person10

who makes a charge against the cash value of an annuity11

contract, or the cash surrender value of a life insurance12

contract, which is excludible from gross income under sec-13

tion 72(e)(11) shall make a return, according to the forms14

or regulations prescribed by the Secretary, setting forth—15

‘‘(1) the amount of the aggregate of such16

charges against each such contract for the calendar17

year,18

‘‘(2) the amount of the reduction in the invest-19

ment in each such contract by reason of such20

charges, and21

‘‘(3) the name, address, and TIN of the indi-22

vidual who is the holder of each such contract.23

‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS24

WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—25

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H.L.C.

Every person required to make a return under subsection1

(a) shall furnish to each individual whose name is required2

to be set forth in such return a written statement3

showing—4

‘‘(1) the name, address, and phone number of5

the information contact of the person making the6

payments, and7

‘‘(2) the information required to be shown on8

the return with respect to such individual.9

The written statement required under the preceding sen-10

tence shall be furnished to the individual on or before Jan-11

uary 31 of the year following the calendar year for which12

the return under subsection (a) was required to be made.’’.13

(2) CLERICAL AMENDMENT.—The table of sec-14

tions for subpart B of part III of subchapter A of15

such chapter 61 of such Code is amended by adding16

at the end the following new item:17

‘‘Sec. 6050U. Charges or payments for qualified long-term care insurance con-

tracts under combined arrangements.’’.

(e) TREATMENT OF POLICY ACQUISITION EX-18

PENSES.—Subsection (e) of section 848 of such Code (re-19

lating to classification of contracts) is amended by adding20

at the end the following new paragraph:21

‘‘(6) TREATMENT OF CERTAIN QUALIFIED22

LONG-TERM CARE INSURANCE CONTRACT ARRANGE-23

MENTS.—An annuity or life insurance contract24

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which includes a qualified long-term care insurance1

contract as a part of or a rider on such annuity or2

life insurance contract shall be treated as a specified3

insurance contract not described in subparagraph4

(A) or (B) of subsection (c)(1).’’.5

(f) TREATMENT AS QUALIFIED ADDITIONAL BEN-6

EFIT.—Subparagraph (A) of section 7702(f)(5) of such7

Code (relating to qualified additional benefits) is amended8

by striking ‘‘or’’ at the end of clause (iv), by redesignating9

clause (v) as clause (vi), and by inserting after clause (iv)10

the following new clause:11

‘‘(v) qualified long-term care insur-12

ance contract which is a part of or a rider13

on the contract, or’’.14

(g) EFFECTIVE DATES.—15

(1) IN GENERAL.—Except as provided by para-16

graph (2), the amendments made by this section17

shall apply to contracts issued before, on, or after18

December 31, 2006, but only with respect to periods19

beginning after such date.20

(2) SUBSECTION (b).—The amendments made21

by subsection (b) shall apply with respect to ex-22

changes occurring after December 31, 2006.23

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SEC. 1002. DISPOSITION OF UNUSED HEALTH AND DEPEND-1

ENT CARE BENEFITS IN CAFETERIA PLANS2

AND FLEXIBLE SPENDING ARRANGEMENTS.3

(a) IN GENERAL.—Section 125 of the Internal Rev-4

enue Code of 1986 (relating to cafeteria plans) is amended5

by redesignating subsections (h) and (i) as subsections (i)6

and (j), respectively, and by inserting after subsection (g)7

the following:8

‘‘(h) CONTRIBUTIONS OF CERTAIN UNUSED HEALTH9

AND DEPENDENT CARE BENEFITS.—10

‘‘(1) IN GENERAL.—For purposes of this title,11

a plan or other arrangement shall not fail to be12

treated as a cafeteria plan solely because under such13

plan qualified benefits include—14

‘‘(A) a health flexible spending arrange-15

ment under which not more than $500 of un-16

used benefits under such arrangement may17

be—18

‘‘(i) carried forward to the succeeding19

plan year of such health flexible spending20

arrangement, or21

‘‘(ii) to the extent permitted by sec-22

tion 106(d), contributed by the employer to23

a health savings account (as defined in sec-24

tion 223(d)) maintained for the benefit of25

the employee, and26

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‘‘(B) a dependent care flexible spending ar-1

rangement under which not more than $500 of2

unused benefits under such arrangement may3

be carried forward to the succeeding plan year4

of such dependent care flexible spending ar-5

rangement.6

‘‘(2) HEALTH FLEXIBLE SPENDING ARRANGE-7

MENT.—For purposes of this subsection, the term8

‘health flexible spending arrangement’ means a flexi-9

ble spending arrangement (as defined in section10

106(c)) that is a qualified benefit and only permits11

reimbursement for expenses for medical care (as de-12

fined in section 213(d)(1), without regard to sub-13

paragraphs (C) and (D) thereof).14

‘‘(3) DEPENDENT CARE FLEXIBLE SPENDING15

ARRANGEMENT.—For purposes of this subsection,16

the term ‘dependent care flexible spending arrange-17

ment’ means a flexible spending arrangement (as de-18

fined in section 106(c)) that is a qualified benefit19

and only permits reimbursement for expenses for de-20

pendent care assistance which meets the require-21

ments of section 129(d).22

‘‘(4) UNUSED BENEFITS.—For purposes of this23

subsection, with respect to an employee, the term24

‘unused benefits’ means the excess of—25

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‘‘(A) the maximum amount of reimburse-1

ment allowable to the employee for a plan year2

under a health flexible spending arrangement or3

the dependent care flexible spending arrange-4

ment, as the case may be, over5

‘‘(B) the actual amount of reimbursement6

for such year under such arrangement.’’.7


subsection (a) shall apply to taxable years beginning after9


SEC. 1003. DISTRIBUTIONS FROM GOVERNMENTAL RETIRE-11

MENT PLANS FOR HEALTH AND LONG-TERM12

CARE INSURANCE FOR PUBLIC SAFETY OFFI-13

CERS.14

(a) IN GENERAL.—Section 402 of the Internal Rev-15

enue Code of 1986 (relating to taxability of beneficiary16

of employees’ trust) is amended by adding at the end the17


‘‘(l) DISTRIBUTIONS FROM GOVERNMENTAL PLANS19

FOR HEALTH AND LONG-TERM CARE INSURANCE.—20

‘‘(1) IN GENERAL.—In the case of an employee21

who is an eligible retired public safety officer who22

makes the election described in paragraph (6) with23

respect to any taxable year of such employee, gross24

income of such employee for such taxable year does25

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not include any distribution from an eligible retire-1

ment plan to the extent that the aggregate amount2

of such distributions does not exceed the amount3

paid by such employee for qualified health insurance4

premiums of the employee, his spouse, or dependents5

(as defined in section 152) for such taxable year.6

‘‘(2) LIMITATION.—The amount which may be7

excluded from gross income for the taxable year by8

reason of paragraph (1) shall not exceed $5,000.9

‘‘(3) DISTRIBUTIONS MUST OTHERWISE BE IN-10

CLUDIBLE.—11

‘‘(A) IN GENERAL.—An amount shall be12

treated as a distribution for purposes of para-13

graph (1) only to the extent that such amount14

would be includible in gross income without re-15

gard to paragraph (1).16

‘‘(B) APPLICATION OF SECTION 72.—Not-17

withstanding section 72, in determining the ex-18

tent to which an amount is treated as a dis-19

tribution for purposes of subparagraph (A), the20

aggregate amounts distributed from an eligible21

retirement plan in a taxable year (up to the22

amount excluded under paragraph (1)) shall be23

treated as includible in gross income (without24

regard to subparagraph (A)) to the extent that25

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such amount does not exceed the aggregate1

amount which would have been so includible if2

all amounts distributed from all eligible retire-3

ment plans were treated as 1 contract for pur-4

poses of determining the inclusion of such dis-5

tribution under section 72. Proper adjustments6

shall be made in applying section 72 to other7

distributions in such taxable year and subse-8

quent taxable years.9


subsection—11

‘‘(A) ELIGIBLE RETIREMENT PLAN.—For12

purposes of paragraph (1), the term ‘eligible re-13

tirement plan’ means a governmental plan14

(within the meaning of section 414(d)) which is15

described in clause (iii), (iv), (v), or (vi) of sub-16

section (c)(8)(B).17

‘‘(B) ELIGIBLE RETIRED PUBLIC SAFETY18

OFFICER.—The term ‘eligible retired public19

safety officer’ means an individual who, by rea-20

son of disability or attainment of normal retire-21

ment age, is separated from service as a public22

safety officer with the employer who maintains23

the eligible retirement plan from which distribu-24

tions subject to paragraph (1) are made.25

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‘‘(C) PUBLIC SAFETY OFFICER.—The term1

‘public safety officer’ shall have the same mean-2

ing given such term by section 1204(8)(A) of3

the Omnibus Crime Control and Safe Streets4

Act of 1968 (42 U.S.C. 3796b(8)(A)).5

‘‘(D) QUALIFIED HEALTH INSURANCE6

PREMIUMS.—The term ‘qualified health insur-7

ance premiums’ means premiums for coverage8

for the eligible retired public safety officer, his9

spouse, and dependents, by an accident or10

health insurance plan or qualified long-term11

care insurance contract (as defined in section12

7702B(b)).13

‘‘(5) SPECIAL RULES.—For purposes of this14

subsection—15

‘‘(A) DIRECT PAYMENT TO INSURER RE-16

QUIRED.—Paragraph (1) shall only apply to a17

distribution if payment of the premiums is18

made directly to the provider of the accident or19

health insurance plan or qualified long-term20

care insurance contract by deduction from a21

distribution from the eligible retirement plan.22

‘‘(B) RELATED PLANS TREATED AS 1.—All23

eligible retirement plans of an employer shall be24

treated as a single plan.25

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‘‘(6) ELECTION DESCRIBED.—1


graph (1), an election is described in this para-3

graph if the election is made by an employee4

after separation from service with respect to5

amounts not distributed from an eligible retire-6

ment plan to have amounts from such plan dis-7

tributed in order to pay for qualified health in-8

surance premiums.9

‘‘(B) SPECIAL RULE.—A plan shall not be10

treated as violating the requirements of section11

401, or as engaging in a prohibited transaction12

for purposes of section 503(b), merely because13

it provides for an election with respect to14

amounts that are otherwise distributable under15

the plan or merely because of a distribution16

made pursuant to an election described in sub-17

paragraph (A).18

‘‘(7) COORDINATION WITH MEDICAL EXPENSE19

DEDUCTION.—The amounts excluded from gross in-20

come under paragraph (1) shall not be taken into21

account under section 213.22

‘‘(8) COORDINATION WITH DEDUCTION FOR23

HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN-24

DIVIDUALS.—The amounts excluded from gross in-25

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come under paragraph (1) shall not be taken into1

account under section 162(l).’’.2


(1) Section 403(a) of such Code (relating to4

taxability of beneficiary under a qualified annuity5

plan) is amended by inserting after paragraph (1)6

the following new paragraph:7

‘‘(2) SPECIAL RULE FOR HEALTH AND LONG-8

TERM CARE INSURANCE.—To the extent provided in9

section 402(l), paragraph (1) shall not apply to the10

amount distributed under the contract which is oth-11

erwise includible in gross income under this sub-12

section.’’.13

(2) Section 403(b) of such Code (relating to14

taxability of beneficiary under annuity purchased by15

section 501(c)(3) organization or public school) is16

amended by inserting after paragraph (1) the fol-17



TERM CARE INSURANCE.—To the extent provided in20

section 402(l), paragraph (1) shall not apply to the21

amount distributed under the contract which is oth-22

erwise includible in gross income under this sub-23

section.’’.24

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(3) Section 457(a) of such Code (relating to1

year of inclusion in gross income) is amended by2

adding at the end the following new paragraph:3


TERM CARE INSURANCE.—In the case of a plan of5

an eligible employer described in subsection6

(e)(1)(A), to the extent provided in section 402(l),7

paragraph (1) shall not apply to amounts otherwise8

includible in gross income under this subsection.’’.9


this section shall apply to distributions in taxable years11


TITLE XI—GENERAL13

PROVISIONS14

SEC. 1101. PROVISIONS RELATING TO PLAN AMENDMENTS.15

(a) IN GENERAL.—If this section applies to any pen-16

sion plan or contract amendment—17

(1) such pension plan or contract shall be treat-18

ed as being operated in accordance with the terms19

of the plan during the period described in subsection20

(b)(2)(A), and21

(2) except as provided by the Secretary of the22

Treasury, such pension plan shall not fail to meet23

the requirements of section 411(d)(6) of the Internal24

Revenue Code of 1986 and section 204(g) of the25

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by reason of such amendment.2

(b) AMENDMENTS TO WHICH SECTION APPLIES.—3

(1) IN GENERAL.—This section shall apply to4

any amendment to any pension plan or annuity con-5

tract which is made—6

(A) pursuant to any amendment made by7

this Act or pursuant to any regulation issued by8

the Secretary of the Treasury or the Secretary9

of Labor under this Act, and10

(B) on or before the last day of the first11

plan year beginning on or after January 1,12

2008.13

In the case of a governmental plan (as defined in14

section 414(d) of the Internal Revenue Code of15

1986), this paragraph shall be applied by sub-16

stituting ‘‘2010’’ for ‘‘2008’’.17

(2) CONDITIONS.—This section shall not apply18

to any amendment unless—19

(A) during the period—20

(i) beginning on the date the legisla-21

tive or regulatory amendment described in22

paragraph (1)(A) takes effect (or in the23

case of a plan or contract amendment not24

required by such legislative or regulatory25

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amendment, the effective date specified by1

the plan), and2

(ii) ending on the date described in3

paragraph (1)(B) (or, if earlier, the date4

the plan or contract amendment is adopt-5

ed),6

the plan or contract is operated as if such plan7

or contract amendment were in effect; and8

(B) such plan or contract amendment ap-9

plies retroactively for such period.10

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rules.house.gov · h.l.c. amendment in the nature of a substitute to h.r. 2830, as reported offered...

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